Count down to RDR – How ready is the UK Life & Pensions Market?
With less than 400 working days to go until ‘go live’ for the UK Retail Distribution Review, many Life and Pensions companies are deep in the middle of planning their implementation. Due to start on 31st December 2012, this legislation will introduce major changes to the way that new long-term savings and investment products are sold across the UK.
Its broad aims are to improve professional standards of investment advisors, improve the clarity around how firms describe their services, and to address the potential for commission to influence advice decisions.Practically, this means subscription to a new code of ethics including new definitions for advice, raised levels of professional education, and an end to traditional ways of charging commission for investment related products in favour of transparent fees.
Many industry analysts and commentators are already predicting structural changes within the market once consumers, armed with new information about how much they are being charged for advice, begin to shop around and start to ask tough questions about the value they are receiving from both the advisor for the advice fee paid and the performance of underlying products.
Technology has a critical role to play in helping organisations remain fighting fit in a post-RDR world.
Meeting the basic compliance needs
- Ensure that underlying systems are able to manage both fee based services as well as commission. Both of these approaches will need to run in parallel post-RDR as the legislation only applies to investment related business transacted after the ‘Go Live’ date.
- Ensure that only RDR compliant propositions are available for sale post 31st December 2012. Web-sites, other channel systems and channel partners all need to be changed.
- Ensure that Platforms comply with the final set of rules on charging and rebates due to be released in Q3 this year, and offer essential services such as re-registration.
- Update internal management reports and operational controls to track performance of business initiated both pre and post RDR.
Demonstrating value and positioning for growth
- Developing new propositions including new channels to market, such as D2C, and access to new funds.
- Employing innovative uses of technology to build stickier relationships with the end consumer (such as improved UIs, online tools, mobile apps and social media).
- Transforming the cost base to compete head-on with new entrants, such as greater use of straight through processing and strategies to isolate or remove the legacy to prevent it becoming a drag on resources.
Navigating the change
- Balancing competing priorities between now and ‘Go Live’ date – such as Solvency II, the EU Gender Directive and other internal strategic change programmes.
- Being ready to react once the final set of rules on Platforms are published in Q3 2011.
- Securing the investment and the team – including the right mix of capabilities to exploit the opportunities for growth.
Over the coming months, Celent will be researching the impact that RDR will have on technology strategy for organisations and evaluating the readiness of the market to implement the change. For more information or inclusion in this research, please feel free to get in contact with me.
And for those of you outside of the UK looking in thinking that this does not apply to me, beware! The European Community is revising its plans for the Insurance Mediation Directive (IMD) and Packaged Retail Investment Products (PRIPs) initiatives, and no doubt will look to see what lessons it can learn from the UK’s RDR.So, watch this space!