How new model firms will stand out in the RDR world

New model advisers have been the trailblazers in dragging the advice sector from the old model world of sales-driven product flogging towards professionalism. Adopting fees and striving for higher qualifications have been key elements in this drive. But with the retail distribution review (RDR) ushering in the level four qualification requirement and the ban on commission, how will those in the financial planning vanguard continue to set themselves apart from the rest?

This concern is not lost on Dennis Hall (pictured), managing director of London-based Yellowtail Financial Planning. ‘This issue has been on my mind for a couple of years. We will lose that distinctiveness,’ he said. But he added that firms with long-established RDR principles embedded in their businesses would still enjoy an advantage over those only now making the transition.

‘It has taken us time to become comfortable with our own proposition – setting fees for example – so it will take firms that have only just become fee based quite a while to get into it,’ he said.

‘I don’t think people who are ready for the RDR have bought into the RDR necessarily. We will have more energy and authority, and there will be problems later on for some firms because they will have to work through all the same mistakes we have had to.’

Standing out from the crowd

Hall said it would be vital for firms to find a niche to thrive in the RDR environment. Yellowtail’s specialism had only recently dawned on him, he said, when he discovered around half of his clients were widows after the firm carried out a segmentation process.

‘We didn’t set out to attract them; it’s just how the cards fell,’ said Hall. ‘Clearly women liked our particular approach to planning more than men. We have no single men as clients. They like to try to beat the market, so we don’t go after them anymore.’

Some have argued that the RDR’s level four qualification requirement will cement chartered status as the badge for advisers looking to set themselves apart from their peers. But David Crozier (pictured below), partner at Northern Ireland-based Navigator Financial Planning, believes the firm’s accreditation with the Institute of Financial Planning (IFP) will be a key differentiator.

‘It is possible to be a chartered financial planner without having ever done financial planning, and there are far fewer accredited firms. There are only two others in Northern Ireland,’ said Crozier. ‘Financial planning has not yet come to the fore as much as other aspects, like charging fees or qualifications. It will definitely be one of the ways we distinguish ourselves.’