Are you prepared for the RDR?

As the deadline for the Retail Distribution Review swiftly approaches, Helen Morrissey looks at how prepared advisers are and asks what support they are being offered.

With just a few months to go until the Retail Distribution Review kicks in, advisers should be busy putting the finishing touches to their preparations in terms of getting qualifications, segmenting client bases and finalising their business models.

However, just how well prepared many advisers are remains subject to debate. While some advisory firms claim to have been RDR-ready for months, others still have much to do. So will the advisory -community be ready by the end of the year and what challenges are they facing in their preparations?

According to Pete Johnson, divisional director of research agency ORC International's financial services division, many advisers have only really started to take their RDR preparations seriously over the past couple of years.

An uphill struggle

"A few years ago, advisers were very blasé about the RDR and didn't think it would have much of an effect on their business," he says.

"But as time goes on and more issues are raised around things like charging and business models, they have become less blasé, more focused on what needs to be done and more aware of how the RDR might affect their business."

Prudential's' distribution change director Russell Warwick also believes adviser focus is shifting in relation to RDR preparations.

"We have noticed a real shift in the agenda regarding the RDR. Two years ago, the focus was on getting professional qualifications," he says.

"Of course, some then moved beyond that and started to look at what their business model should look like. That seems to be where most advisers are finding themselves right now."

But while it is good to see that advisers are seriously looking at what they need to do, there are concerns that many have left themselves with too much to do before the December deadline.

"When I go to industry events and talk to other advisers, it does surprise me how much work some people still have to do in terms of getting ready and transferring their business model," says Julie Hepworth, group regulatory manager at Perspective Financial Group.

"I would think that people should be using this final year to actually road-test these new structures rather than still working out what they are going to do."

However, while there are concerns about the amount of work many advisers still have left to do, Warwick believes much of this concern is misplaced.

He says: "I don't think they have left their preparations too late. We need to remember that these people have a business to run and a lot of challenges to deal with.

"We need to remember that not everything has to be finalised and put in place by the end of the year. They won't be stopped from working because small final details are not in place.

"They just need to focus on getting their basic service proposition in place on time and then they can develop it on an ongoing basis.

"That seems to be a reasonable way forward for me as they can adapt the model to meet their customers' needs."

Available support
So how much support is available for advisers preparing for the RDR? It would seem providers have been active in providing gap-fill seminars and support for sitting exams.

Organisations such as the Pensions Management Institute have also looked to gain accredited status, enabling them to help its members achieve the relevant qualifications, as well as issuing statements of professional standing, checking continuing professional development records and ensuring adherence to its code of professional conduct.

"Many of our members work for big employee benefit consultancies and by and large, they have had a lot of support," says Tim Middleton, technical consultant at the Pensions Management Institute.

"Where people tended to have difficulties was when they have been working for smaller firms where they don't necessarily get the same level of support."

According to Middleton, the Institute will introduce its own qualification - the Diploma for Regulated Retirement Advice to help members qualify for CF30 status. However, while there is plenty of support out there for advisers, Warwick believes more could have been done to ensure the finer detail of the rules was released earlier.

"I do think it would have been helpful if we had received some of the detail around practical issues a bit sooner," he says.

"We need there to be more focus on what advisers must do by the end of the year as opposed to what can be developed over a longer timeframe.

He continues: "One good example is the independent/restricted debate and clarification over what is really needed for someone to say they are independent. I think a lot of this final decision making will happen post-RDR."

Which way now?

So as the clock continues to tick towards the deadline for the RDR, what do advisers need to focus on?

Warwick says: "Advisers need to separate the ‘must-dos' from those things that can be left until later.

"I would also say that advisers should not feel under pressure to go further in terms of their service offering than they are comfortable with. You can't throw everything into it. Advisers need to look at whether they can deliver what they are promising on a consistent long-term basis.

"They also should not feel the need to undercharge for their services. They should charge what they are worth."

According to Hepworth, The Perspective Financial Group put together a simple client service agreement as a means of properly explaining the group's service proposition to clients.

"It is a very transparent charging structure and service charter," she says. "We sent it out to as many people as possible and so far, it has been very well-received. People can see what they are getting for their money in a one-page document."

However, Hepworth also warned advisers not to leave things too late, particularly when it comes to getting the appropriate qualifications.

"Gap-filling could prove problematic as it can take up to 60 days for gap-filling to be verified," she says.

"This means you need to have got your statement of professional standing by 31 October at the latest if you want to be ready on time. I think we will see a last-minute rush to get this."

Avoiding casualties

But what of those who decide they no longer want to continue in business post-RDR? Are we likely to see a mass exodus of advisers at the end of this year and what impact is that likely to have on the industry as a whole?

Hepworth says: "I think there has been an element of denial - many believed that the RDR would not happen.

"If you also look at the average age of an adviser, which is about 50, then many may not want to make the big switch from a commission-based model towards a system whereby you get paid for the advice regardless of product sale.

"There are going to be some casualties. Some will leave the industry at the end of the year."

But while there will be some exits, Hepworth believes this will result in increased emphasis on bringing in new people - and a new outlook - into the industry.

So while there is undoubtedly a lot of work to be done, it would seem those advisers choosing to remain in business have not left themselves with too large a mountain to climb ahead of the RDR.

It is true advisers may not have received the amount of detailed guidance they would have wished for in advance of the deadline. But if they can focus on getting their basic infrastructure in place, then they should be able to apply the finishing touches early in 2013.