LONDON, February 11, 2011 /PRNewswire/ --
- With Industry Set to Spend GBP1.4bn on RDR Compliance, Doing it Wisely Will Differentiate the Winners From the Losers in the 'Brave New World'
Capco, the global business and technology consultancy dedicated solely to the financial services industry, has identified five areas that need to be addressed following the FSA's radical shakeup of business practices through the Retail Distribution Review (RDR). While investment costs will be large, the cost of failure is even greater and Capco has offered its guidance for those who choose to remain in the industry.
1. Client segmentation
Given the requirements for 'fee for advice' and expected pressure on these created by a more transparent and competitive environment, wealth managers must segment their clients more effectively, so as to better align customer value and cost to serve.
2. Financial planning solutions
With a wider definition of 'whole of market', independent advisors will be well advised to use financial planning and product catalogue solutions to allow them to stay abreast of a wider product range and provide compliant advice.
3. Wrap platforms
Advisors will need more highly featured platforms through which to transact report and manage RDR-compliant fees. These platforms will need to offer an expanded range of products and wrappers.
4. Target operating model
With fees and margins under pressure, alongside rising regulatory standards for professionalism and service, wealth managers must look to optimise their operating models for effectiveness, efficiency and experience.
Given all of these changes, wealth managers must look again at those services which can best be sourced from external providers. This will allow them to achieve lower costs and greater access to skills and product, but without sacrificing strategic differentiation. Equally, service providers must reassess how the demands of RDR will change the needs of their potential clients, and hence review the services they offer and the way in which they go to market.
Mark Jenkinson, Capco Partner, provides further detail on the implications of the Retail Distribution Review in his recent Point of View, "They've been reviewing the situation." (http://www.capco.com/capco-institute/research-thoughts/retail-distribution-review-rdr)
The UK's Financial Services Authority's (FSA) proposals are due to commence in 2013 and will have a far reaching impact on the distribution of financial advice to private individuals. Through the RDR the FSA intends that providers' - from IFAs and Fund Managers through to Private Banks and Insurers - traditional business practices will be challenged on areas such as remuneration, accountability and professional standards.
Following the financial crisis, consumer confidence has been visibly shaken as the FSA looks to reassert itself as the champion of investor protection.
RDR represents a major investment for the industry as a whole. The new standards and procedures around professionalism alone are set to cost firms in excess of GBP150 million, according to the FSA's own estimates - let alone operational, technology and on-going costs after 2013.
Now firms across the board are investing heavily in RDR. Some global banks have already undergone multimillion pound risk assessment exercises on the costs of RDR, focusing on distribution at the retail end.
Capco, a global business and technology consultancy dedicated solely to the financial services industry. Our professionals combine innovative thinking with our unrivalled first-hand industry knowledge to offer our clients consulting expertise, complex technology and package integration, and managed services to move their organisations forward.
Through our collaborative and efficient approach, we help our clients successfully increase revenue, manage risk and regulatory change, reduce costs and enhance control. We specialise in banking; capital markets; wealth and investment management; finance, risk & compliance; and technology. We serve our clients from offices in leading financial centres across North America and Europe. To learn more, visit our web site at http://capco.com.