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Adviser Workshop: What last-minute checks do you need to make for RDR?

Adviser Workshop: What last-minute checks do you need to make for RDR?

Emma Ames (pictured), Calum Cameron and Kevin Gillibrand describe the final provisions they are making as the RDR deadline approaches.

Emma Ames

Co-director, Cathedral Financial Management

We thought we were more than prepared for the retail distribution review (RDR) and it would not be a problem. It was not until September when we realised how much paperwork was needed to implement those changes. It has been a bit of a shock and extremely time-consuming.

We had to go directly to providers to find out how they were operating adviser charging because they are all very different. They have different administrative procedures and they request different things. We are spending hours finding out what each provider wants.

Revising the terms of business

We have also been working on communicating changes to clients because their method of payment will change: each client agreement has previously been on a bespoke basis. We have to understand and recognise that giving up our time in order to explain this is worth it to keep this inked and secured for the future.

Cathedral is in the process of revising its terms of business. We set out to reword it and include our fee menu. It is a massive task and we want it worded correctly from a compliance perspective, but we also want it to be consumer-friendly.

Also, we don’t want it to be something we just whipped up from a Financial Services Authority template. We want ours to stand out because clients are going to be using this as a guide to what we do and charge.

One encouraging thing is that no clients have objected to the different way they will be paying us.

More importantly, we increased our fees for the first time in 10 years and very few clients have objected to this.

Calum Cameron

Chief executive, Willow Financial Management

Our RDR preparations are about evolution rather than revolution because we’ve been working as fee-based planners for seven years.

We are RDR-compliant. All of our staff have taken the exams and we’re happy with continuing professional development.

At the moment, we are refining our client propositions to make it even clearer to our clients what a different service standard will offer.

The fee agreement has just been updated and we’re looking at how we brand our client proposition.

Focus on efficiency

We are also working on our business efficiency to make sure we do everything in a standardised way. The efficiency comes from making sure lots of little things are a lot more straightforward.

One of the key differentiators in the IFA sector will be how technology is used. What we do needs to be not only of a good quality but delivered in a fast and slick way.

Our clients’ fee model won’t change. The only thing that is changing is their terms with platforms, which we are negotiating. Some of the share classes of the funds they hold will change, but the approach we will take with our clients will be the same.

Regulation after the RDR will focus more on how a business operates. It’s not just ‘is it compliant?’ but ‘how does it do what it does, present its services, talk to clients, document its services, use technology to be as efficient and cost effective as possible?’

I think the one thing the RDR has done is make firms look at the detail of what they do, and that’s great.

Kevin Gillibrand

Director, Fraser Wealth Management

The main area of concern is around customer agreed remuneration. We’re considering if it’s best practice to get new fee agreements signed by clients.

It’s an additional job, but for certain providers like Skandia that have issued new paperwork for the RDR, we are asking clients to re-sign the client authorisation while we are doing our reviews.

We’re not telling clients we are altering our fees in any shape or form, we are just reconfirming that we are sticking to the fee we have already agreed. It’s about making sure we’re thinking about the next step.

Getting the paperwork in order

We are going to get fresh paperwork set up the way we think it should be. That might be over the top, but we would rather be safe than sorry.

We are also making sure every other aspect of clients’ paperwork is in order. If we know we are planning on changing something, we’ve decided to do it now, on this side of the RDR.

We have the relevant qualifications and fee structure, but we are looking at the potential hazards after the RDR.

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