RDR implementation is only the first of many hurdles for the adviser community, explains Gary Thomson, head of specialist services at AXA Wealth
If RDR is a catalyst for change then we should recognise that while we can agree with aspirational statements that suggest change is just another word for learning, or that change is a natural phenomenon, I am sure we can also all agree that change is really hard.
Margaret Wheatley, a respected writer and management consultant, wrote: “People do not resist change, people change all the time. What people resist is having change imposed upon them.” This seems to be a great summary of the way various people feel about RDR. For some advisers and providers it could feel as if RDR is dictating what control they have and creating problems to deal with. Others could have an alternative view that RDR presents an opportunity that they are ready to embrace and that its core principles make sense.
There are several points that need to be dealt with; individuals in the more positive camp tend to believe that all of the surrounding noise can be ignored. To do this, advisers should always act in their clients’ best interests, with sound commercial judgement and compliance with the regulatory changes.
I have a view that those who are changing their business because they feel forced to are unlikely to achieve long-term benefits. Like people who embark on a crash diet, they will apply discipline and focus for a short period of time and achieve some immediate results, (in this case, regulatory compliance) but unless some fundamental issues have been addressed it may be difficult to sustain those changes over a longer period of time.
I see the industry polarising into two camps, those who look at RDR as the end of a process, considering only the elements of their business that must be changed to achieve compliance with the regulatory shift. The other will be those who have a desire to grow and develop their business irrespective of the RDR. These firms will look beyond the short-term focus and look at the business basics required to promote sustainable profitable growth.
Balance your card
The Balance Scorecard concept developed by Kapland and Norton is always a useful reference; it helps us to consider the different dimension of a business and the areas on which we need to focus. Businesses that pay equal attention to all four of these areas are, generally speaking, more likely to be well organised, efficient and profitable. The box below shows an example of how the scorecard could be applied to an advice business.
The risk with RDR is that it is easy to devote too much attention to the obvious areas driven by compliance, for example: the terms and conditions scheme, disclosure documentation, statement of professional standing certification, regulatory returns and capital adequacy requirements. Of course, these areas need to be dealt with along with the fundamental question of whether to operate on a restricted, independent or hybrid model.
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