sponsored bytheideaslab.co.uk/pdfs/ideas lab 150212.pdf · 13:45 - 14:15 achieving consistent...
TRANSCRIPT
Robert Reid and Roderic Rennison
15th February 2012
Sponsored by
1
10:00 –10:05 Introductions – Stuart Podmore
10:05 –10:30 RDR Update – Roderic Rennison
10:30 - 11:00 Defining a proposition - Rob Reid
11:00 - 11:15 Coffee
11:15 –11:45 Building a proposition - Stuart Podmore
11:45 - 12:15 Using new technology to deliver profitable propositions - Eddie George
12:15 –12:45 Value charging – Rob Reid
12:45 - 13:15 Presenting the value of advice to clients – Roderic Rennison
13:15 -13:45 Lunch
2
13:45 - 14:15 Achieving consistent propositions and processes – Roderic Rennison
14:15 - 14:45 Independent vs. Restricted and employed vs. self – employed -
Robert Reid
14:45 - 15:15 Achieving RDR readiness – Roderic Rennison
15:15 -15:30 Tea
15:30 - 16:00 Q & A Session
16:00 Close
3
Stuart Podmore
4
Roderic Rennison
5
A binary decision?
Choice of study formats provides further flexibility
Gap filling mostly straightforward
Individual/tailor made tuition may be required for
some
Beware capacity issues re exam sittings as 2012
progresses
Contingencies need to be in place for those not at
QCF Level 4 by 31.12.12
Departing advisers’ clients need to be handled
sympathetically and efficiently
NB: Clarity still required in relation to ETFs and EISs
6
Adviser Transition very much WIP - more of which
later
Facilitation ◦ Recent providers’ document “A shared approach to
Adviser and Consultancy Charging” provides a starting
point but much detail is still needed
◦ Will the degree of facilitation differ between providers or
will there be an industry norm?
◦ Will all products or just some be covered?
◦ What will the interaction be between providers, fund
mangers and platforms?
7
Clarity needed urgently
Consolidators potentially exposed
Will providers’ response be consistent in the same
scenario ◦ i.e. will some switch off commissions and others not?
Whatever the outcome, firms and advisers will need
to be clear when provider/adviser interaction with
clients will “trigger”: ◦ a cessation of commission and
◦ a need to agree Adviser Charge
NB: Final payment of contracting out rebate commissions
cease in 2012. Another source of income lost
8
So, following the latest HMRC guidance, all clear? ◦ Adviser and arranging = intermediation =exempt
DFM position remains to be clarified ◦ Court case involving Deutsche due in March
What the guidance demonstrates is that
documentation will be key when HMRC come
calling ◦ Process maps that confirm VAT exemption – or VATability
◦ Clear client engagement processes that evidence clients’
intention to arrange products
◦ Document VAT assessment for each client on file
◦ Decide whether or not there is a need to register for VAT
◦ If introductions made to DFMs await VAT clarification
9
One of the areas of continuing FSA focus ◦ Consistency of client outcomes is key
◦ Await and act on FSA Centralised Investment Process
Paper due in March 2012
◦ Document rationale for platform selection and review
◦ Review use and choice of risk tools
◦ Investment policies need to be robust and underpinned
by documented processes
◦ The “D” in “DFM” does not stand for delegate!
10
The RDR is a marathon not a race. It should be
approached on this basis
Don’t assume there will not be further changes – or
surprises
Plan on the basis of what is known and don’t delay
Keep a watching brief on developments
Retain sufficient flexibility to be able to adapt
Assign responsibility for this watching brief; don’t
assume someone else in your firm is doing so
11
Rob Reid
12
Market
Experience
Offerings
Benefits
Alternatives & Differentiation
Proof
13
Market
Experience
Offerings
Benefits
Alternatives & Differentiation
Proof
14
Proposition
Ultimate level of service
Next level of service
Base level of service
15
Your firm
Your client
16
Inside out
Here is our offering
take it or leave it
I want what I want if
you don’t make a
profit its your problem
Your firm
Your client
17
listening
evaluating taking action
delivering
18
Continuous improvement
Continuous improvement
Feature Advantage Benefit
We rebalance
investment portfolios
every six months which
means that
Your portfolio is in line
with your ATR which
means that
….you are not taking
more risk than you are
comfortable with
We analyse your legacy
investments which
means that
We can identify those
that need attention which
means that
….your investments are
efficient in terms of costs
???????? which means
that
???????? which means
that
…. ????????
???????? which means
that
???????? which means
that
…. ????????
19
Feature Advantage Benefit
which means that
which means that
….
which means that
which means that
….
which means that
which means that
….
which means that
which means that
….
20
Does our positioning statement promise strong benefits and build
expectations?
Does it create immediate positive interest and curiosity?
Does it relate to something already in the prospects mind?
Does it solve a high priority problem for our clients?
Is it short simple and dramatic?
Is it believable intriguing and compelling?
Does it differentiate us from our competitors?
Does it reposition the competition?
Does it screen out non-prospects?
Does it trigger a strong emotional response (marmite test)?
21
inputs Value Added Process Outputs & Outcomes
Client experience New and retained Clients
Profitable Growth Offerings
Benefits
Cost & Risk Enhanced offerings
Corporate through to
sales messaging
Price
Alternatives
22
Type Buyer Behaviour Motivation
Transactional Intrinsic value buyers:
“Keep it cheap and easy
to do business”
Understands the
product.
Perceives it as
substitutable
Cost Focus
Resents time wasted
with “sales people”
Consultative Extrinsic value buyers: I
don’t know the answer:
help me analyse and
solve the issue.
Focus on how the
product is used.
Interested in solutions
and applications
Values advice and help
Needs the sales person
23
Proposition 1
Relationship
2
Data
3
Analysis
4
The Plan
5
Implement
6
Monitoring
Holistic Y Y Y Y Y Y
Structure/
Product free
Y Y Y Y N Y/N
Focussed Y Y Y N Y Y/N
Project/ One off Y Y Y Y/N Y/N N
1. Establishing and defining the client and personal financial planner relationship
2. Gathering client data and determining goals and expectations
3. Analysing and evaluating the client’s financial status
4. Developing and presenting the financial plan
5. Implementing the financial planning recommendations
6. Monitoring the financial plan and the financial planning relationship
24
Who are you?
What business are you in?
What kind of people do you serve?
What’s needed by the market you serve?
Who is your competition?
What’s different about your business?
What unique benefit is derived from your service?
25
Don’t spend a lot of money on expensive
brochures
Don’t pad your proposition
Don’t make it overly emotional
Be restrained in your use of superlatives
Don’t make non compliant claims
Don’t make claims that you cannot substantiate
Don’t ignore what you are truly best at
26
Be back for 11.15 please
27
Stuart Podmore
28
Using new technology to help deliver profitable propositions
Eddie George
JP Morgan Ideas Lab workshop
15th February 2012
Context
Client portals
Digital Identity services
Online security
Safe Social Media
Online Advice
Advice platforms?
Rob Reid
38
Standard methods
◦ Charging by the hour
◦ Fixed charge
◦ Ad valorem
Charging by results (minimum fee plus share of
benefit to client)
39
Last item of correspondence?
Fair comparisons
Take every opportunity
Re-write reports to bring the focus to value
Use cumulative value across all clients re PR ◦ e.g. “ABC saved its clients in excess of £1m through its
value based planning charges”
40
Investment performance
Success
Tax savings
Cost savings
41
Investments
◦ Benchmarks
◦ Charging period
◦ What happens if?
42
Success
Tax savings
Cost savings
43
Tangible value ◦ Debt reduction
◦ Tax savings
◦ Reduced cost of
protection
◦ Improvements in cash
flow
◦ Early Retirement made
possible
◦ Able to make charitable
donations
Intangible value ◦ Increased comfort and
security
◦ Able to retire and
maximise leisure time
◦ Comfort in knowing
estate in good shape
and family provided for
44
Don’t forget the profit margin!
Total breakeven cost Complex client
year one
£3634
Targeted profit margin 25%
Fee =
Total Fee including 25% profit margin
for Complex clients Year one
£4845
45
Value
delivered to
client
Pre advice
position
Post advice
position
Benefit to
client – year
one
Estimated
Personal tax
liability
£60,000 £37,500 £22,500 £4500
Investment
performance
£300,000
benchmark
performance
£300,000
performance
benchmark +
3%
£9,000 £1,800
Protection
premiums
£200 pm £150 pm £600 £120
Total fee
based on
value
£32,100 £6420
Charge to client
Current Fee (cost +profit fee) £4,845
Additional Value based Fee £1,575
Total fee charged £6,420
46
Decisions to be made ◦ On all activity
◦ On planning fees only
◦ On investments only
◦ A mix of the two but not all
47
Fair
Measurable
Aligned
Minimum fees protect profit
48
Roderic Rennison
49
Source: Rev Dr Peter Cotterill
50
Prior to presenting to clients you will have: ◦ Researched your clients’ preferences
◦ Calculated the costs of your business overheads
◦ Identified the cost of providing different types of advice/sales
◦ Segmented your clients
◦ Developed your post RDR propositions
Only then can you realistically move on to developing
your strategy(ies) for presenting your propositions to
clients
51
Do you really know what your clients value and what
they don’t and the priority they attach to each?
Have you undertaken research to find out?
Have you investigated what your peers offer?
Have you asked prospects who didn’t become
clients why they didn’t buy your services?
Do you ask clients who go to other advisers why
they have done so?
Do you undertake ongoing research and satisfaction
surveys?
Knowing what your clients value and the priority
they attach to each service you offer is key
52
Do you know what it costs to deliver each
component part of the services that you offer or
plan to offer post RDR?
Do you know what it costs to put into place
different types of products/structures?
Do you have a firm idea of the costs of delivering
ongoing service for your future propositions once
they are in place?
Client cross subsidy may not be possible to
totally eliminate but it needs to be significantly
reduced to ensure success post RDR
53
Intermediary concerns ◦ “How can I preserve and
enhance my income?”
◦ “Will my cashflow be
affected?”
◦ “How do I bring all my
advisers with me?”
◦ “How can I address the
concerns of my staff?”
Client objections ◦ Why does your advice
cost so much?
◦ I just have a question; I
don’t need it in writing
◦ What if I don’t need help;
do you refund the
retainer?
These concerns and objections can only be addressed by understanding and
addressing what motivates your clients and your advisers and other staff
The research undertaken to date indicates that
most advisers will use providers or platforms to
Adviser Charge rather than seek to charge explicit
fees
This potentially limits the scope for intermediaries
to deliver their services profitably to their entire
client base
Retainers provide a practical solution to
eliminating cross subsidy and they have the
benefit of not being linked to underlying fund
values
55
Know your value ◦ Be clear about the value of what you are delivering to
clients based on the research you have undertaken
Price your value ◦ Be sure that you price what you deliver at a level that
makes a profit
◦ Be very clear within your business who has the sanction to
make exceptions
Sell your value ◦ Emphasis your expertise
◦ Point out that it is a finite supply - i.e. that there are going
to be fewer advisers in future in an era of rising demand
Don’t compete on price –it’s a recipe for failure!
56
Don’t believe what the surveys say automatically
apply to your business. Many of the questions are
poorly phrased and the samples may not be those
who you are targeting
Alignment with other services that they value can
and does help provide perspective: ◦ “What is the hourly rate you pay to have your car serviced?”
◦ “What is the cost of your monthly gym/golf membership?”
◦ “How much do you pay for private health insurance”?
Also, in the case of your existing clients, they know
what value you have delivered already! Ask those
you know well to act as points of reference
57
Not all clients are the same
Offering a choice of how they can access your advice
and services (that are costed and which you want to
provide) will enable both you and your clients to get
what you both want
Most but not all clients value face to face advice but
for those who want to access your services remotely
via the telephone or online you may want to consider
offering this service with differential pricing
In short, it’s not illegal to have more than one
proposition or advice channel
58
Some advisers have decided to introduce/test out
Adviser Charging/fees on new rather than existing
clients
It’s a matter of preference but new clients: ◦ Do not impact on existing relationships if there are areas
of the proposition that subsequently require adjustment
◦ Enable advisers to start with a “clean sheet”
◦ Enable advisers to gain confidence
However…don’t put off talking to existing clients
and agreeing your future services and the basis of
your future remuneration in case others get there
before you do
59
There is a lot to think about. Therefore having
carefully thought through and designed support
materials to help you present your propositions to
both new and existing clients is important
Examples (aside from details of your propositions)
include: ◦ PowerPoint presentations
◦ Agendas
◦ Aide memoires
◦ Q & A sheets (Dealing with possible objections)
◦ Pre approach letters (but only where there will be no
client meeting to explain the move to Adviser Charging)
60
Assign responsibility for oversight of the process
Organise training ◦ Videos
◦ Role plays
Get feedback from family/friends
Work with other friendly advisers
Practice makes perfect!
61
Please be back at 13.45
62
Roderic Rennison
63
The RDR has a complex series of interwoven aspects: ◦ Exams/professionalism
Achieving QCF Level 4
Maintaining SPS records
CPD
◦ Adviser Charging
Reviewing/redesigning propositions
Developing skills
◦ IT and processes
Implementing change
◦ FSA Scrutiny
Getting more intrusive and intense
64
Is there a common sales process?
Is new and existing business processed in a
standard way
How are investments selected and managed?
The RDR is an opportunity – rather than being just
a series of impositions - to stand back and work
through what is good for clients, advisers and your
business going forward
65
The best designed plans risk failure if there is
insufficient consultation and communication
All staff need to be involved to some degree
Buy-in is key whether from advisers or support
staff
Input needs to be ongoing not just one off
Organise periodic briefings
Actively seek ideas and input
Provide regular updates – both face to face and
via email bulletins
66
Ensure there is a robust platform selection and
ongoing assessment methodology; increasingly,
they will become pivotal elements of any
intermediary’s business
Likewise tools – in particular risk tools need to be
carefully evaluated and trained in
The FSA have made it clear that tools are not a
substitute for advice; rather, they support it
67
Time is short and a mistake this is already being
made is to assume that new systems and
processes only need to be ready for 31.12.12
Ideally, new propositions, systems should be
ready by 01.07.12 and testing and training should
be completed by 30.09.12
The last quarter of 2012 should then be available
to transition or allow dual running where
appropriate
In any event, do not take providers and software
suppliers at face value; seek validation for any
claims they make regarding readiness
68
Have you reviewed your (legal) agreements and
SLAs?
Are you clear what you want and need and what
providers and suppliers can provide?
Do you have written commitments and
confirmation from them?
What are the consequences or sanctions for non
or late delivery?
69
The successful implementation of consistent
propositions and processes delivers a number of
benefits ◦ Improved systems and controls that is likely to result in:
Improvements in operating costs
More effective oversight of risk and compliance
Greater profitability
A higher embedded value for the business
This is an exercise in seeing the RDR
requirements as being an opportunity not as a
threat or an imposition
70
The optimum proposition may not be the first one
you develop
Testing and re-validation is important
So is ongoing feedback ◦ Feedback from clients and more importantly those who
do not become clients
◦ Client councils
◦ Adviser and staff forums
◦ Ongoing liaison with and measurement of providers
71
Rob Reid
72
A decision that many are ignoring
Rules apply at firm and personal recommendation level ◦ Provide unbiased and unrestricted advice
◦ Equipped to give comprehensive and fair analysis of relevant
markets
Comprehensive ◦ Awareness of all types of retail investment products suitable for
a client
◦ Consideration of all providers and products available in the
market place
Relevant market ◦ Contains all retail investment products capable of
meeting a client’s needs and objectives
◦ May be limited by the client – e.g. ethical investments
Retail Investment Products ◦ Independent advisers will need to consider a broader
range of products than hitherto
Rules apply at firm level and for panels
Other issues
Implications ◦ More FSA/FCA scrutiny
◦ Additional study
◦ Keeping on top of market developments
◦ Understanding and maintaining the required resources
◦ Review of advice process
◦ Investment process
Documented investment process
Impact on existing client portfolios
Area of focused activity for FSA
Where the rules for independence are not met
Restricted advisers may be any form of advisers
Firms/advisers can decide the basis of any
restrictions
Certain aspects remain unaffected ◦ Qualifications
◦ Cap Ad
◦ Adviser Charging
◦ Suitability
Emotion
Ignorance
Enlightenment
Analysis
Enactment
The label “Independent” is (still) seen by many
IFAs as worth having
“Restricted” is seen as second best
Change is challenging for many intermediaries
irrespective of the RDR and so carrying on is the
preferred option
Initially intermediaries acted on gut instinct and in
the early stages of the RDR were unclear
regarding the obligations and consequences of
opting for remaining “independent”
Only when PS 10/6 was published in March 2010
did the obligations seemingly become clear
FSA Factsheet SFDF057 09/10 provided further
clarification
These and other documents made some
intermediaries question their stance and some
began to reconsider their initial decision to remain
Independent
Subsequent analysis - for example, The PFS
professional direction paper – “Independent &
Restricted Advice” has led to a further tranche of
intermediaries reconsidering their position
In particular the following have had a bearing: ◦ The possibility of being both Independent and Restricted
◦ The absence of any requirement to use “Restricted” on
business cards etc
Scope of advice: consumers expect a pragmatic
approach
A financial adviser should be able to advise on: ◦ All financial products – 52% agree strongly/agree
◦ Broad range of products – 84% agree strongly/agree
◦ Limited number of products – 8% agree strongly/agree
Source: JP Morgan Asset Management/Citywire Market Intelligence
Does “broad range of products”= Restricted?
Likely end result ◦ The level support provided by both traditional and new
style networks and compliance support groups will in some
significant measure influence the eventual balance
between Independent and Restricted
◦ That in turn will be influenced by the providers and to a
lesser extent fund managers
◦ Research will also continue to influence outcomes – e.g. if
clients don’t appear to require Independent but rather
“choice”. (Latest JP Morgan research appears to support
this.)
◦ The “unknown” is the “vigour” with which the FSA FCA
interpret and police Independent status
There will be a requirement for support in terms of
research
This is an increasing cost
The requirement for outsourcing may lead to
“thinner” firms maximising outsourcing
The final determinant may be the new capital
adequacy rules
85
Pragmatic approach would be to set up another
firm under a network
Panels will still need research
No guarantee that professional bodies will accept
Restricted advisers
86
Self Employed ◦ Client ownership
◦ Add turnover not value
◦ Ceiling to their contribution
◦ Share of revenue increases with volume
Employed ◦ Clients owned by firm
◦ Contribute to value
◦ No personal ceiling
◦ Bonus linked to profit not revenue
87
Roderic Rennison
88
Having a written plan is an important starting point
If you don’t have one already, it’s not too late!
The plan should address each area of the RDR
that affects you and your business
Responsibilities and time lines should be assigned
The plan should be reviewed at regular intervals –
at least monthly during 2012
The plan should not stop at 31st December 2012. It
also needs to encompass bedding in the changes
in 2013 and beyond
89
Who is driving the plan/transition?
Do they have enough time from their day job?
Do they understand all the issues?
What help can they call on?
90
Review your RDR transition plan if there is one
Arrange an internal - or external audit
Identify and agree issues/shortfalls
Implement further actions as appropriate always
keeping 31.12.12 in mind
91
The following elements, depending on the focus and
size of the intermediary, are likely to be appropriate:
◦ Strategy
◦ Professionalism
◦ Adviser and staff residency and development
◦ Proposition
◦ Transition to Adviser Charging
◦ Processes and systems
◦ Regulatory aspects
92
◦ Review of
existing RDR transition and implementation plans &
progress to date
proposed actions and timescales,
resources allocated, and their adequacy
methodology to determine “Independent” vs. “Restricted”
status
practical implications of each alternative
Impact on PII
financial implications re transition from commissions to
Adviser Charging/fees
Proposals to: deal with outstanding and emerging issues
93
◦ Review of
progress towards all advisers achieving QCF Level 4
status, including gap filling
management oversight systems and controls re QCF
Level 4 status
SPS administrative arrangements
advice in relation to examination syllabuses and tuition
◦ Proposals to
address advisers who have made insufficient progress
deal with advisers who plan to exit/retire
improve management oversight
94
◦ Review of :
adviser and staff development plans – RDR ready?
plans and proposals to assist advisers in transition
plans for client transfer to QCF Level 4 competent
advisers
implementation plan including meetings/calls with
selected advisers and staff
staff meetings (all) to ensure they all understand extent of
the changes and any issues
◦ Proposals to:
address any areas of shortfall
95
◦ Review of:
client base and existing research if carried out
proposed/implemented proposition(s)
accompanying documentation
future client acquisition plans
client retention/transfer policy
internal communication and training
◦ Proposals to:
address shortfalls and suggested alternative approaches
where applicable
96
◦ Review of :
transition plan(s)
adviser and staff training plans and materials
how Adviser Charging will be consistently applied across
the business
◦ Proposals to:
address shortfalls and suggested alternative approaches
where applicable
97
◦ Review of:
processes to apply Adviser Charging – via products,
platforms and/or charging explicit fees
agreements with providers and fund managers etc
application of VAT to processes
how collection of Adviser Charges and fees will be
achieved
adviser remuneration policies
IT and back office systems and their ability to deliver the
required solutions
wrap/platform/tool strategies and oversight
compliance, risk and T & C arrangements to meet the
new requirements
◦ Proposals to:
address areas of weakness identified
98
◦ Review of:
RDR transition plans against the FSA’s stated
considerations and expectations
the changes necessitated to maintain “Independent”
versus “Restricted” and the risks arising
the changes necessitated with particular reference to
controls
◦ Consideration of:
future reporting requirements
99
An RDR audit will, if undertaken systematically
and thoroughly, provide the basis to complete the
transition successfully
Documenting the findings, managing the actions,
allocating time and resource to see them through
to completion are all key
“What gets measured gets done”
10
0
If the RDR was a movie it would be an epic…
Star Wars
or
The Seven Year Itch
DIY rarely produces a professional finish
Think about getting a non exec or a coach
Engage with other professionals
Pace yourself; it should be an organised marathon;
don’t let it become a disorganised sprint!
10
1
And to avoid false starts:-
Please let us have your questions during the
break
10
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Back at 15:30
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Stuart, Roderic and Rob
Workshop Sponsored by
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5
Stuart Podmore
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