April 2011

RDR - Not our problem - Oh but it is!

paul martin

There is a misconception currently prevalent amongst many mutuals (and non mutuals) that goes something like –‘we know about RDR, it does not affect our products/ distribution/ customers so we will not devote any time to it’.

How can this be a misconception? Surely you have enough to concern yourself with without focusing on changes that you do not need to react to?

The critical issue is that whilst RDR immediately affects those organisations selling investment based advised products its impact on the market shape post RDR is likely to be so profound all companies should prepare for it. The impacts are beginning to be felt already as organisations re-define their market positions and offerings e.g. Barclays departure from mass market advice. These major shifts will continue for some time after January 2013 with the real industry shape not fully apparent until something like January 2015.  In our view organisations are going to have to be able to survive and thrive in an industry of constantly moving parts.  For this to happen they must ensure their business models are likely to be sound and relevant in an emergent landscape.

In the not so distant past we knew the industry distribution models, how they functioned and made money, we knew the consumer segments and could create propositions to match, we knew the competition, we knew where our costs lay and we could attack them, we knew the niche we operated in and what made us different. These certainties are fast disappearing and smart companies are preparing to be adaptable so as to remain relevant.

But where should organisations start in preparing for RDR? Let us consider just a few of the moving parts I referred to earlier and scratch the surface of the scale of change organisations should prepare for: 


  • The great imponderable of adviser numbers will not go away. The decline in their number ranges in estimates from 10% to 50%, whatever the true number is this route to market will alter significantly. Advisers will now sell a relationship rather than products or even advice, they will inevitably be drawn toward the High Nett Worth market and the use of platforms will become universal. If this is a channel you rely upon are you ready for such a change in behaviours, market focus and attitude to product providers.   


  • The growth in consumer centric regulation allied to the changes in consumer behaviour creates a new dynamic where the customer is in control of the relationship with Financial Services organisations. In addition old segmentation models based upon customer value no longer apply and attempts to define by channel are inevitably spurious. The power in the relationship will be firmly in the hands of the consumer (as it is in nearly all other markets). Consumers will be more demanding and the routes to engagement with them will need to be more sophisticated.

-The Growth of Direct

  • There has been an inexorable growth of self research and on-line self help sites in all markets. This change in behaviours is evidenced in all age segments and socio-demographic groups with the biggest growth being experienced in the wealthiest 20% of the population. In a world where selling via advice will come under severe pressure the attractions of a direct offer are obvious. Is your organisation really positioned to take advantage of this opportunity? Just building a website with self fulfilment capabilities is not going to be enough. A direct offer in this new dynamic requires a broad digital engagement utilising new channels of communication, information management and fulfilment.

-New Entrants

  • In any arena experiencing change there is the inevitability of new entrants assessing whether they can leverage current competencies to take market share from less nimble current providers.  As indicated above the consumer market is changing and new players will see the opportunity to ‘cherry pick’ the most attractive clients using established brands (potentially from other markets) and low cost routes to market that they have existing mastery of.  Do you understand who these players will be, what their propositions will consist of and the likely target markets?

These questions are really just the start of a necessary process of examining the Financial Services market holistically encompassing and considering a wide range of fundamental impacts. As an industry we have in the past been accused of being silo orientated in our thinking, we are specialists in certain areas and that’s where we apply our intellectual weight. RDR is challenging this approach and demands broader more creative thinking. If organisations are to thrive post RDR they must understand the likely outcomes in the next two or three years and react accordingly.

Some organisations are trusting to being fleet footed and suggest they will wait to see the shape of the market and react accordingly. As an approach it has a seductive appeal in that it means you do not have to do anything now or invest any money. However with the breadth of the likely changes wrought by RDR coupled with other upcoming regulatory changes it is a brave strategy to essentially sit on one’s hands. It would seem more sensible to at least undertake some visioning and hypothesising to identify likely future whole of market shapes, offerings, consumer demands and behaviours and measure strategic plans ad ambitions against these scenarios. Armed with these perspectives on the future marketplace organisations will have an intellectual benchmark that can be adapted and developed as events unfold against which strategic decisions can be measured. This approach provides an intellectual rigour to planning but also provides strong evidence of a practical and pragmatic approach to future visioning in response to the inevitable challenges of both internal and external scrutinisers.


Paul Martin

Director, Winchester White


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