Looking beyond RDR

November 10, 2012 Sham Gill

With the final preparations for the RDR underway, 2012 is a big year for advisory firms. Choosing the right technology provider is a vital part of this preparation. Technology underpins and empowers a company’s business, processes and people, helping it to meet its objectives. The wrong technology partner can do just the opposite, leading to too many compromises. Many client management system (CMS) providers are trying to make sure their software is fit for the post- RDR world. In the main, this means making sure that charges from product providers can be reconciled. But the RDR is an opportunity to do much more than that.

There are five key areas you need address for adviser charging:

  1. Setting charges – how will you set your charges for your services?
  2. Taking charges – how will you allow clients to pay for advice?
  3. Reconciling the charge – how will you reconcile charges from product providers, platforms and direct from clients?
  4. Remunerating advisers – how will you remunerate your advisers?
  5. Regulatory reporting – how will you generate the additional reporting data required by the FSA?

It is a mistake to see charges as a replacement term for commission. Consistent processing and reporting will prove impossible without the ability to raise and invoice charges for each “advice event” rather than just at client or policy level.

Being able to reconcile payments automatically from clients for initial and ongoing charges will be just as important. But RDR functionality is just part of what firms should consider when reviewing their technology.


Hosting – most providers now offer hosting options for a client management system. Although central
to an advisory business, a CMS is not usually the only business-critical application. Hosting for the system only provides part of the solution for an organisation that wants to be truly cloud based. Having to maintain the infrastructure for supporting these other applications can dilute the cost/service benefits of having the CMS hosted in the first place.

Many providers rely on other third parties for the hosting, making issue resolution and ownership more difficult. You will need to check you are comfortable with the hosting provisions being provided. In addition, does your supplier allow hosting for other business applications such as Outlook email and Microsoft Office? This can fundamentally change the way an organisation operates, allowing it to move to a true cloud-based solution by removing the dependency on in-house infrastructure and support altogether. This cuts the costs of IT support as well as making it easier to implement flexible working and working from home.

This in turn will save money on renting office space as you can ask yourself how much desk and storage space you really need. In addition to the hosting, you will need to ensure that the supplier offers comprehensive data back-up (both on and off site), communication and disaster recovery options.

Data security – your data is one of your company’s most valuable assets. Your technology supplier should be committed to protecting it. Information security accreditation, such as ISO 27001, offers you the re-assurance that your data is being processed safely. Certification also demonstrates the supplier’s commitment to its customers in ensuring that the right policies and procedures are in place to protect your data.

Component model – throughout your business, some CMS users will use the system more than others. However, most advisory firms pay the same price per user regardless. Does this sound like you? If so, you should consider a component- based pricing model as this will allow you to pay only for the software modules you are actually using. As well as ensuring a better end user experience this also significantly reduces the cost of ownership. Financial stability – the costs of software development and maintenance are going to increase as organisations deliver more functionality and better-integrated services. Only those companies with the financial strength and technology capability will be able to operate effectively in this market. Your due diligence in this area is vital to ensuring a stable future for your business. Roadmap – any technology decision should be seen as long-term investment and as such, you will need a technology supplier that can demonstrate a roadmap that extends beyond current RDR requirements. What is your technology partner planning post-RDR? Not all technology providers have made the same commitments to the future of the financial advisory sector.

Now may be the right time for you to consider your technology and ask those difficult questions. After all, this could mean the difference between a profitable future for your business and no future at all.

About the Author

Sham Gill

Managing Director, SSP Adviser —“What interests me is understanding how the financial services and general insurance sectors are evolving and helping clients respond to the challenges that this brings. I really enjoy working with clients to identify the business and operational drivers of value and then designing and delivering innovative insurance solutions that help them to meet tomorrow’s challenges.”

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