Articles - Advisers agree post-RDR landscape is better than predicted

 Advisers are broadly positive about the implementation of the Retail Distribution Review (RDR) compared to a year ago, according to the latest Adviser Barometer from Aviva*.

 Reality vs Predictions

 There are several signs to indicate that the reality of RDR has been less worrying than advisers had originally predicted.

 More than half (55%) report no significant change in the number of active clients they are servicing post RDR, with a further 28% seeing an increase in their active client base. Most (52%) of these say this is largely due to new clients looking for advice for the first time, as well as taking on former clients of IFAs who have exited the market (29%).

 Three out of five (59%) advisers have adopted a combined charging structure of initial investment and assets under management – typically 3% initial interest and 0.5% on-going annual charge - but clients have not been deterred by this move. Almost three quarters (72%) of advisers say that their clients’ reaction to adviser charging has been broadly positive or neutral, up from 65% in March 2013.

 Encouragingly, almost two thirds (62%) of advisers claim not to have lost any clients as a result of adviser charging, and a further 28% report only a very small loss. This is a very different scene to six months ago when only 39% (Mar’13) thought their client base would not be affected at all.

 There have been marginal changes in the type of advice model an adviser chooses to operate – 83% have assumed an independent model (84% Mar’13) and whilst gaining some traction, there is still a relatively small number (13% compared to 10% Mar’13) opting to offer restricted advice. Almost all advisers (94%) are satisfied with their choices, having no plans to change their model in the next 12 months. This figure is up from 84% in March 2013.

 Tailoring service to meet clients’ needs

 Most of the adviser community (46%) continues to service clients with less than £50,000 investible assets; only one in five (19%) require clients to have a minimum of £50,000 for them to provide pension and investment advice. However, although profitability is still a major concern, some firms (36%) have not set any minimum investment levels, leaving them with a number of smaller clients to manage.

 When asked what they do to service their smaller clients, two in five (38%) say they tailor their service depending on their clients’ needs and willingness to pay, but worryingly one in five admits to servicing clients at a loss (22%) and a similar number (22%) have not yet decided how to deal with them.


 The number of platforms used by advisers has also increased over the last 12 months, with 69% of advisers using two or more platforms (61% Mar’13); half are actively using only two or three on a regular basis. Of those using platforms, half place more than 61% of their new business through the technology – up from just 17% in October, 2010. One in six advisers do not use platforms at all.

 Concerns and opportunities

 Despite all these positive signs and a general increase in economic optimism, advisers still worry about how much income they will be able to retain as profit (48%), albeit this concern has fallen (down from 52%, Mar’13). Growing concerns include regulatory fees and levies (48%) up from 44%, and legacy commission (44%) up from 36%.

 Advisers are not taking these challenges lightly – they continue to explore strategies to protect their profitability, including pursuing the growth in the “At Retirement” market (63%), with an increasing number of consumers now shopping around for higher annuity rates.

 Other opportunities arise from orphaned clients (34%) and low interest rates (32%), increasing the need for fresh financial reviews.

 Andy Beswick, Intermediary Director at Aviva, says:“There is a sense of emerging stability from our latest barometer findings. Advisers seem to be more optimistic about the reality of RDR compared to their predictions a year ago. Naturally some advisers have left the market, but this has presented those remaining in business with more opportunities.

 “Obviously advisers still have their concerns and we’ve seen a shift in these over the last year, but they are still actively supporting the mass market and looking for new ways to boost revenues. Advisers are continuing to develop their propositions to customers and work on how they can advise them on a profitable basis.

 “Aviva recognises that it has a key role to play in supporting advisers and will continue to deliver practical solutions and business developments, like the New Thinking initiative, to help them.”

 * Methodology: Research carried out by Aviva in September 2013. 1,231 advisers were interviewed via an online survey.

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