13 September 2012
Standard Life helps advisers plan to protect their revenue stream post-RDR

An adviser charging transition plan that outpaces reducing commission revenue is the key to the sustainability of an adviser business, says Graeme Bold, Standard Life Director UK Retail RDR.

Most advisers are likely to hit some legacy triggers, under the RDR rules, in the first six months of go live date which will require them to move some remuneration over to adviser charging.

Standard Life is aiming to help advisers be aware of - and prepare for - any impact this transition to adviser charging will have on their cash flow. Advisers need to compensate for a post-RDR commission revenue dip, caused by an unpredictable need for advice from clients which may trigger the switch off of commission under RDR legacy rules, with an increase in ongoing adviser charging revenue.

Bold says: "The move over to adviser charging will not happen over night and for most advisers it will be a steady transition over some time. For most clients it is likely to be business as usual initially, with no immediate need for advice which could trigger the switch over. For those clients advisers deal with on a transactional basis, for example, the need to move over to adviser charging is unlikely to be pressing.

"It's also worth remembering the different treatment of 'life' and 'non-life' products under the FSA legacy rules. The risk of SIPP customers, for example, triggering advice events will be much lower than those invested in ISAs or mutual funds.

"But for some clients the need to switch over to adviser charging will be immediate, triggered by events like portfolio rebalancing or end of tax year planning. It's vital that advisers are aware of when the triggers are likely to occur, with which clients, and plan accordingly.

"We've built a clear, practical process which we hope will help advisers protect their revenue streams during this transition period. We're working with advisers to examine the types of clients they have, products they are invested in and the type of advice they require to assess when they are likely to hit an advice event which will trigger the move over to adviser charging. We'll then be able to help them plan for that transition in advance.'

Risk rating clients

Standard Life is helping advisers prioritise clients by risk category in terms of how often advice is likely to be given - or requested - over the course of a typical year. From this a clear plan can be put in place to deal with clients in each of these categories.

• High Risk: Significant revenue risk ahead of the next review. High demand for advice, sometimes outside a regular review (e.g. business owner with complex affairs, employee receiving regular bonuses)
• Medium Risk: Limited revenue risk until the next client review. Ongoing need for advice, activity usually triggered by the regular review or a predictable event (e.g. tax year end).
• Low Risk: Revenue risk outweighed by cost of delivering ongoing service. Currently, a profitable transactional client, but assets unlikely to deliver enough revenue to support an ongoing service. Limited ongoing need for advice, although life events or market conditions may trigger contact or self-service activity.

Prioritised Client Engagement Plan

"We've developed a template to help advisers create a prioritised client engagement plan,' said Bold. "This looks at when an adviser should consider moving clients in each 'risk' category to an adviser charging basis and the action that should be taken to engage with those clients. This could be an immediate face-to-face meeting to explain the changes, writing in advance of the next client review, or developing a process for reacting to revenue risk events and assessing what criteria a client should meet to qualify for an ongoing service. Alongside this, we've drafted a series of client engagement letters/emails that can be customised by the adviser as appropriate.'

Ends

For further information, please contact:

Claire Burston
Direct: 0131 245 5078
Mobile: 07738 301004
Email: claire_burston@standardlife.com

Patricia Corrigan
Direct: 0131 245 5916
Mobile: 07740 924558
Email: patricia_corrigan@standardlife.com

Twitter: @sl_press

Notes to Editors

Standard Life has a dedicated area on Adviserzone with details and support for advisers in the run up to RDR - www.adviserzone.com/rdr

Established in 1825, Standard Life is a leading long term savings and investment company, with around six million customers worldwide. By understanding and offering innovative products to meet its customers' needs, Standard Life helps people with their financial planning, so they can feel more confident about the future. Standard Life offers a range of individual and group pensions, SIPPs, ISAs, annuities, life assurance, offshore bonds, investment management, wealth management, tax planning and estate management services.

Standard Life is headquartered in Edinburgh and employs around 9,000 people across the UK, Canada, Ireland, Germany, Austria, India, USA, Hong Kong and mainland China. At the end of June 2012 the Group had total assets under administration of £206bn.

You can follow Standard Life press office on www.twitter.com/sl_press.

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