Planning for success in 2013
and beyond
For adviser use only © 2012
Challenges and opportunities
•Adviser charging will replace commission for new
advice from 31 December 2012.
•For new clients this should be relatively straight
forward to introduce.
•For existing clients this presents challenges and
opportunities – for both advisers and providers.
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What do the changes mean for advisers?
Adviser impact
Old model
business
Advice events
trigger …
New model
business
Profitable client
charging structure
Trail
Commission
Reduction in trail
over time
Clear client service
propositions
Reactively transition
to adviser charging
Proactively migrate
clients to adviser
charging ASAP
Adviser
Trail
Charging
commiss
ion
Providers need to:
•Support the transition to adviser charging
•Support the continuation of commission income where the regulation allows, whilst
minimising charging complexity.
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Understanding impact on commission
income - what the regulation says
Event
Does the regulation allow existing trail commission to continue?
Fund switch (commission paid from the life product)
 (existing trail will continue on the switched fund)
Fund switch (commission paid from the fund)
 (existing trail will stop from the switched fund)
New advice to rebalance (commission paid from the
life product)
 (existing trail will continue)
New advice to rebalance (commission paid from the
fund)
 (trail from the sold units will stop)
Advice to rebalance given pre RDR (commission paid
from the fund or the life product)
 (existing trail will continue)
Maintaining or reducing regular payments

Increases to regular payments
 (no additional trail paid but existing level of trail can continue)
Additional single payments
 (no additional trail paid but existing level of trail can continue)
In-specie re-registration

Execution only
 (new trail can be paid for EO services)
• Continuing to pay trail commission alongside adviser charging within the same plan results in a complex charging structure
• A transition to adviser charging over the longer term will minimise complexity and protect revenue from future regulation in this area.
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Making a successful transition
Four steps to prepare your business for success
1. Finalising
segmentation
2. Transition valuable
clients to adviser
charging
3. Clear approach for
lower-value clients
4. Execution plan
• Identify profitable
clients to offer your
full service
proposition.
• Identify lower-value
clients.
• Ensure your core
client proposition is
profitable under
adviser charging.
• Build a structured
approach to transition
your clients and
business.
• Build a low-cost
proposition for lowervalue clients.
• Build a plan to
transition clients.
• Prioritised execution
plan.
• Focusing resources
where the value lies.
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Segmentation
Low value
clients
Strength of relationship
Adviser Charging break even point
C
NURTURE
A
KEEP
Valuable clients
D
?
B
GROW
Profitability (value)
Develop a low-cost proposition
Transition to Adviser Charging
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Defining your client service propositions
Access to
XYZ
Investment
Management
Programme
Core Services
Reporting
Review
A clients
B clients
C clients
D clients
>£100,000
>£50,000
<£50,000
<£25,000
Access to the XYZ
Financial Advisers Ltd
model portfolios / DFM
Access to the XYZ Financial
Advisers Ltd
modelto the XYZ
Access
portfolios /Financial
DFM
Advisers
Access to the XYZ
Financial Advisers Ltd
multi- manager funds
Access to the XYZ
Financial Advisers Ltd
multi-manager funds
Review every 6 months
Ltd ??????
Review every
6 months
Reactive reviews
Rebalancing as required
Review
every 6
Rebalancing
as required
months
Annual review, including
rebalancing
Customer website to view
investment value & performance.
Rebalancing as
Customer website
to view
required
investment value & performance.
Customer website to view
investment value & performance
Income tax reporting
Income tax reporting
Regular email contact
Liaise with solicitor/accountant
Liaise with solicitor/accountant
Newsletter
Mortgage advice
Mortgage advice
IHT planning
IHT planning
All other core services available
for extra charge
Tel & email contact at any time
Tel & email contact at any time
Newsletter
Newsletter
6 monthly valuation and
performance reports
2 each year at our office or
your preferred location
6 monthly valuation and
performance reports
2 each year at our office or
your preferred location
Annual valuation and
performance reports
Annually at our office
Customer website to view
investment value &
performance
Newsletter
All other core services
available for extra charge
Self-service via online
account
At extra charge at
client’s request
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Low cost service proposition for lower value
clients
Client
contact
Reducing
cost for
low-value
clients
Investment
solutions
Platforms and
wrappers
Back
office
Review your client
contact strategy:
Outsource timeconsuming tasks:
Client self-service
opportunities:
Widen the scope
of the back office:
1. Telephone-based
service
1. Simple risk
assessment tools
2. Reducing
frequency of
reviews
2. Fund monitoring
and selection
Ability for the client
to carry out nonadvised tasks
online:
1. Automating and
integrating back
office systems
3. Delegating
ongoing contact to
back office staff.
4. Regular comms
via e-mail
3. Portfolio
construction
4. Portfolio rebalancing
• Valuations
• Obtain investment
information
• Updating
personal details
2.Outsourcing
paraplanning and
admin tasks
3. Client
correspondence
and reactive
contact
Check the scope of your client agreements to understand your existing commitments
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Delivering a direct proposition
Terms of business
PI cover costs
&
exclusions
Execution only v advised
regulation
Direct
proposition
Client contact strategy
Compliance
resource
Infrastructure (e.g. web capability)
A direct proposition can be as expensive and complex as a full-advised proposition.
Is ‘light touch advice’ the way forward?
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Our view of the future
2012
2013
Advisers start to transition
their high value clients to
adviser charging as soon as
the functionality becomes
available.
Advisers will continue to
receive trail commission as
revenue from their lower value
clients in the short term.
Advisers will review their
lower value clients to make
sure they are in products that
facilitate adviser charging in
the future and require lower
intervention.
Advisers may consider full
remuneration through adviser
charging when the first advice
event occurs. (This avoids the
complexities of trail and
adviser charging operating
within the same plan).
2013 and beyond
A transition to adviser
charging in the longer term
will future proof revenue.
Advisers and providers will
innovate to deliver lower cost
advice models facilitated by
technology.
Outsourcing will change the
shape of advisory businesses
to release more time to focus
on delivering client value
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Standard Life accepts no responsibility for advice that may be
formulated on the basis of this information.
No guarantees are given regarding the effectiveness of any
arrangement entered into on the basis of these comments.
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Questions
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