Planning for success in 2013 and beyond
For adviser use only © 2012
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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
New model business
Clear client service propositions
Trail commiss
ion
Advice events trigger …
Reactively transition to adviser charging
Adviser Charging
Providers need to:
•Support the transition to adviser charging
•Support the continuation of commission income where the regulation allows, whilst minimising charging complexity.
Profitable client charging structure
Proactively migrate clients to adviser charging ASAP
Reduction in trail over time
Trail Commission
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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
1. Finalising segmentation
• Identify profitable clients to offer your full service proposition.
• Identify lower-value clients.
2. Transition valuable clients to adviser charging
• Ensure your core client proposition is profitable under adviser charging.
• Build a structured approach to transition your clients and business.
3. Clear approach for lower-value clients
• Build a low-cost proposition for lower-value clients.
• Build a plan to transition clients.
4. Execution plan
• Prioritised execution plan.
• Focusing resources where the value lies.
Four steps to prepare your business for success
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Transition to Adviser Charging
C NURTURE
AKEEP
BGROW
D?
Adviser Charging break even point
Segmentation
Str
engt
h of
rel
atio
nshi
p
Low value clients
Valuable clients
Develop a low-cost proposition
Profitability (value)
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Defining your client service propositions
A clients
>£100,000
B clients
>£50,000
C clients
<£50,000
D clients
<£25,000
Access to XYZ Investment Management Programme
Core Services
Reporting
Review
Access to the XYZ Financial Advisers Ltd ??????
Review every 6 months
Rebalancing as required
Access to the XYZ Financial Advisers Ltd model portfolios / DFM
Review every 6 months
Rebalancing as required
Customer website to view investment value & performance.
Income tax reporting
Liaise with solicitor/accountant
Mortgage advice
IHT planning
Tel & email contact at any time
Newsletter
6 monthly valuation and performance reports
2 each year at our office or your preferred location
Customer website to view investment value & performance.
Income tax reporting
Liaise with solicitor/accountant
Mortgage advice
IHT planning
Tel & email contact at any time
Newsletter
6 monthly valuation and performance reports
2 each year at our office or your preferred location
Access to the XYZ Financial Advisers Ltd multi- manager funds
Annual review, including rebalancing
Access to the XYZ Financial Advisers Ltd multi-manager funds
Reactive reviews
Customer website to view investment value & performance
Regular email contact
Newsletter
All other core services available for extra charge
Customer website to view investment value & performance
Newsletter
All other core services available for extra charge
Annual valuation and performance reports
Self-service via online account
Access to the XYZ Financial Advisers Ltd model portfolios / DFM
Review every 6 months
Rebalancing as required
Annually at our officeAt extra charge at client’s request
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Low cost service proposition for lower value clients
Reducing cost for
low-value clients
Client contact
Investment solutions
Platforms and wrappers
Back office
Review your client contact strategy:
1. Telephone-based service
2. Reducing frequency of reviews
3. Delegating ongoing contact to back office staff.
4. Regular comms via e-mail
Outsource time-consuming tasks:
1. Simple risk assessment tools
2. Fund monitoring and selection
3. Portfolio construction
4. Portfolio re-balancing
Client self-service opportunities:
Ability for the client to carry out non-advised tasks online:
• Valuations
• Obtain investment information
• Updating personal details
Widen the scope of the back office:
1. Automating and integrating back office systems
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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Direct proposition Compliance
resource
Execution only v advised regulation
Terms of business
Client contact strategy Infrastructure (e.g. web capability)
PI cover costs &
exclusions
Delivering a direct proposition
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
2013 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
Advisers will continue to receive trail commission as
revenue from their lower value clients in the short term.
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).
2012
Advisers start to transition their high value clients to
adviser charging as soon as the functionality becomes
available.
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.
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Confidential Restricted – Not to be disclosed beyond authorised roles within Standard Life group or authorised third parties
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.
Questions
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.Standard Life Assurance Limited is authorised and regulated by the Financial Services Authority. Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary. www.standardlife.co.uk © 2012 Standard Life, images reproduced under licence