Getting a handle on impending regulation

The world of financial services is about to embark upon one of its
seemingly generational structural changes.The Financial Services Authority is being broken up and refocussed as the Prudential Regulation Authority and the Financial Conduct Authority. Things
will be more intrusive – that much has been promised.

At the distribution end of the value chain we have the Retail Distribution Review that has become a part of our lives and is due to come into effect from January 1 2013.

It will have a huge impact on the advisory community, particularly those involved in investments and retirement planning. Why? Commission previously paid by the provider will be banned.

It will be replaced by a transparent agreement between clients and advisers and, of course, advisers will need to meet new and significantly higher qualification standards just to be in the advice
business, let alone make a success of it.

For advisers in the mortgage market we have the Mortgage Market Review
bubbling away in the background and although it has been oft repeated by the FSA that there will be no ‘lift and drop’ of the RDR rules into the MMR, experience says we can’t rule anything out.

Earning commission for protection sales is still allowed but we should keep an eye on this one.

For brokers, the RDR would seemingly have no immediate impact but it is enlightening to see how IFAs are responding to the challenges posed by new regulation. The RDR has caused IFAs to look carefully at their business model with fresh eyes and ask some searching questions.

Just who are their clients and can they place a value around them? Do they know how much it costs to service them and just as important, what will they charge clients for future advice when the provider has no future say in determining sales reward?

This last question has led to thoughts of different charging structures for different levels of service. Can an IFA continue
to operate on a ‘one size fits all’ level of service to all its clients?

This thought process has led to client segmentation and a menu of services becoming available to clients. They can choose what they want and how much they are prepared to pay.

We have observed fresh thinking on the part of IFAs as they move from a traditional transactional product sale model to one focussed on charging for advice and building recurring income into the business, thus stabilising cash flow and embedding value.

The advisory community has always been good at seeing market opportunities but what we are witnessing is a growing number of IFAs extending their services and realising the importance of retaining clients in challenging times.

We have seen clear evidence that advisers are moving into areas that they previously ignored. As they examine and articulate their own business proposition to clients we have seen the growing importance of GI.

Domestic buildings and contents insurance now forms a significant
earner for many businesses and again has provided the opportunity to open a dialogue around personal protection and tenants insurance.

Many IFAs and brokers have clients who own a portfolio of properties so it makes sense for advisers to focus on them and offer professional advice.

Our experience demonstrates that many of these investors hold the wrong insurance cover, having tried to make conventional domestic buildings and contents cover fit to their portfolios. Many amateur and accidental landlords have a clear need for advice and access
to better cover. So how in practical terms can you find these clients and design and implement marking campaigns targeting them.

One way would be to talk to your estate and letting agent connections. if we are honest we have probably not given enough of our attention to lettings professionals in the past.

Solicitor contacts who act for amateur and portfolio landlords and who themselves may be property investors are also worth engaging with.

You could segment your existing client bank by identifying those who
have taken out buy-to-let and let-to-buy mortgages which were popular during the boom times, and the grown-up children of existing clients.

Your segmentation work can pay dividends here by identifying landlords and younger renters as both groups are receptive to targeted messages.

For more Information visit www.uinsure.co.uk

Mike Raybone
Chartered Marketer and emarketing specialist
Mortgage Brain Ltd - www.mortgage-brain.co.uk