Yes, I know, I live in a house made of glass from top to bottom, yet here I am with a rock in my hand. There is so much about my own business, let alone my clients’ businesses, that I completely fail to understand, it’s absurd for me to criticise anyone else for the same failing. But still.
I was at a partly-RDR-related event this morning (sometimes I think I’m at a partly-RDR-related event every morning). At some point in the proceedings, a fairly senior retail funds marketing man said he expects the whole funds distribution marketplace to change dramatically when RDR is implemented, commission is banned and clients have to start “paying IFAs fees for investment advice.” When I said that most clients will hardly notice the difference, he gave me a pitying look.
In fact, though, it’s his ignorance that’s to be pitied, not mine. When it comes to the very small amount of business generated by ad hoc clients coming in off the street and asking for an ISA recommendation, adviser charging may have an important effect. But for clients in longer-term financial planning relationships, there will be very little difference: the only significant point will be that instead of telling them what he’s taking in commission, as he does at the moment, the IFA will have to ask them to agree to what he’s proposing to take as an adviser charge.
Once the client has agreed, the adviser will then take this amount, indefinitely into the future, either by helping himself to money from the client’s platform cash account, or by cheque rebated from the product provider. As far as investment is concerned, the evidence so far is that the amount the adviser will take will more often than not be 1% per annum – rather more than his current 1/2% trail commission, but probably about the same as trail plus the occasional lump of initial commission on new investments. All of this, from the client perspective, is less-than-revolutionary change.
Anyway, the thing is, there’s room for quite a bit of discussion and debate about what all this means – personally, I believe that shifting clients onto an adviser charging basis will be straightforward enough but maintaining the level of the charge indefinitely may prove quite tricky. But at this stage in the game I really don’t think there’s still room for fairly senior funds marketing clients who still don’t have the faintest idea how the RDR changes actually work.
As I say in almost every blog, this small example reflects a bigger issue – in this case, the lamentable ignorance of so many clients about their businesses, products, competitors and industries. Some, of course, are fantastically expert and well-informed, and I suppose more often than not it’s the more senior ones. But equally, there are loads who are horribly ignorant, and I fear that more often than not it’s the marketing and communications people.
Over the years, I’ve learned to spot the warning signs. If you’re in a briefing meeting asking questions about the product, or the key competitors, or the target audience, you’ll often find there’s a point at which the clients start a) becoming quite ratty, impatient and irritable, and b) getting a sort of hunted and evasive look in their eyes. This particular combination – irritable and evasive – means you’re on the point of taking them out of their comfort zones, and it would be as well to stop now before things get embarrassing.
Ignorant as I am of so many things, I am nevertheless a curious person, and I am astounded by the lack of curiosity about the workings of their organisations, industries and markets shown by so many financial marketers. How can they spend so much time in their offices and still know so little about what their firms do?
Sometimes, I admit, it’s a victimless crime. Some of the knowledge and insight that I’m talking about is only really important for personal pride and satisfaction. But there are other times when it really matters. And I think that if you’re an investment marketer and there’s just over a year to go, not having a clue about how a transformation as dramatic as RDR is going to work is probably one of them.