Surviving the new season

What will be the ultimate impact of RDR on the wealth management industry?

The greatest impact of the RDR is transparency of costs and the disclosure of any revenue the firm may receive when managing a client's affairs. Put simply, this will mean firms will need to justify their charges and how they add benefit to the client. To firms who cannot do this, clearly the RDR is a threat. To those that can, the RDR should be seen as an opportunity to widen market share and create stronger deeper relationships with their clients.

How has RDR affected the fundamental relationship between client and adviser?

There has always been an uncomfortably close relationship between wealth management firms and fund management groups in the same way that IFAs and product providers used to work. RDR clearly breaks this relationship and puts the wealth manager as the agent of the client. Over time, this will significantly alter relationships with fund management groups as wealth managers put them under pressure to cut their costs.

What do you mean by "uncomfortably close"?

This refers to the fact that traditionally commissions could have influenced the choice of an investment or indeed if it were dealing commissions the size and frequency of the deals. Wealth managers and IFAs should be the agent of the client and the client should be their only paymaster. The RDR has made this aspect very clear, which is good news for clients. The outcome is that no intermediary can be influenced by third-party payments, so investment houses will stand and fall on their performance and service.

Is the importance of time-based advice fees on the increase leaving asset-based charging being challenged against value?

Time-based or fixed fee-based advice is already on the rise and will continue to do so. This is simply the new model compared with commissions. The asset-based charge is an interesting challenge: does it really cost twice as much to run double the money? This will undoubtedly come under scrutiny, but this pressure should also be cascaded onto the fund management firms as well. But the argument should not focus around price, instead it must focus around value. …Understand what clients value and what they don't. This will clearly challenge many business models.

How can firms demonstrate value to clients?

Value is a tough one as the only person that can judge that is the client and many clients' needs are different. Client-listening programmes will be essential so firms can understand how their clients rate them, what services they value and what they should do more of. In addition, firms should be very open about the amount of work and research they do to look after clients.

Do you see a change under way to the link between segmentation, productivity and profitability?

Client segmentation is key. What you provide for each segment needs to be carefully costed out as firms will not be able to cross-subsidise services. The net effect of this is already being seen with non- or less profitable clients now paying the correct rate or the firms no long offering their services to this sector.

Could technology diminish the adviser's value?

Technology will enhance the client proposition and advisers should not fear it. It will not replace them but it will make them focus on areas that the client values. It will allow for greater levels of service, provide the client with new services and create deeper relationships with clients. Sharing information is not a threat. It is out there on the internet already. Remember: information is not knowledge.

Will the impact of technology on the front-end and back-end business process be dramatic?

As costs come under pressure, efficiency is key. Technology is the enabler of this and having clearly defined business models. The challenge is not creating these models but how to migrate the existing business model into the new one.

Is the future wealth management leader a knowledge manager at the core?

Customer relationship management technology will help firms deliver more for less. But the firm has to have the culture to deliver this and many firms are still slow to come to the table in this respect. Culture needs to change in many firms and the difficulty of doing this should not be underestimated. Firms that get this right will win.

Martyn Laverick is director of sales and marketing at Broadstone Pensions & Investments

Read our full report on RDR and wealth management here

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