impact of regulation on the shape of ifa distribution and strategic opportunities pursued by sanlam
TRANSCRIPT
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Impact of regulation on the shape of IFA distribution and strategic
opportunities pursued by Sanlam
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Overview of RDR ImplicationsRDR Impact Adviser Implications Provider Implications
Market Structure
Higher threshold for independence
Minimum professional standards
Increased capital requirements
IFA exits? Consolidation Emergence of large advisory firms Advisers switch to tied Move upmarket to ‘independent’ Expand into manufacturing?
Need to secure market access in restricted landscape
Proposition
Adviser must agree charges with customers
Charges must be transparent
Product and Advice charges separated
Setting the advice charge tariff – level and structure
Clarify proposition and target market to justify charge
Advice: one off or on-going? Improve sales effectiveness
(productivity, unit costs) Invest in adviser support Individual adviser remuneration
Compete without reliance on commission
Flexibility in how advice is charged for
New business mix and
value
IFAs “unbiased and unrestricted”
Extend beyond packaged products
Opportunity for banks to adopt simplified advice
More sophisticated product selection processes
Increased take-up of non-packaged investment products
Understand more acutely cash flows within their business
Respond to threat of reduced margins
Tax and capital impacts
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How RDR affects Product Design
RDR – the direct impacts:Remove commission biasTransparency and disclosureIncrease professionalism of advice
AND Indirect impacts:Capital and Value flowUse and role of PlatformsNew routes to market From Products to Propositions
CONSUMER AWARENESS & TRUST
RE-ENGINEER THE
MARKET
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No advice Basic adviceAdvice under ICOBS
Simplified advice Restricted adviceIndependent advice
Regulatory position
Current today Current today – very limited
Requires revision to be economically viable
In market today for protection sales
Model considered but not yet confirmed
Industry expected to propose workable solution
Exist post RDR Exist post RDR
Customer experience
Customer requests purchase / is provided information only
Customer is provided basic recommendation (but not premiums)
Customer is provided recommendation
Customer given recommendation
Customer given recommendation from restricted providers
Customer given recommendation from whole of market
Adviser qualification
n/a Any ICOBs Which QCF level 2/3/4?
QCF level 4 QCF level 4
Customer charging/remuneration
Potentially moving to intermediation charge
Commission Commission Separate charge for advice
Will customers pay in this segment?
Separate charge for advice
Separate charge for advice
Potential channels to be used
Online Contact centre Branch
Online Contact centre Branch
Online Contact centre Branch
Online Contact centre Branch
Online Contact centre F2F
Online Contact centre F2F
Products Any Stakeholder Protection only Low risk investments/protection cover
Any, from restricted or tied panel
Any, true whole of market
Product design must be tailored to the channel & the advice model
Advice models and standards
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Changing Business Models
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Product to Proposition
Product approachFocus on acquisitionDistributor versus Customer needsOnly part of the value chain, focussed on product returnsNarrow definition Leads on features and benefitsProducts supplemented with commission and wider support to distributors
PropositionFocus on life cycle needsDistributor and Customer needsWhole value chain, how is the product generating its return and how is the distributor generating theirs?‘Marry’ the product with the adviceStay focused on needs
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Focus on acquisition
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What do IFAs want?
To deliver on promises to clients Cost efficiency Sustainability Building value
– Demonstrate assets under influence
– High proportion of reoccurring income
– Profitability
De-risking Guarantees Expertise Training Marketing Business support IT support
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What will be the drivers moving forward?
Cost– Building the scale
Guarantees – At a sustainable cost– That are safe– Reduce risk not increase it – Post retirement market– With profits? Will the Pru win?
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What will be the drivers moving forward?
Barriers to entry Transparency De-risking
– Building process with IFAs– Managing funds to risk categories – Sharing risk
NMG Survey “The lack of ‘cost leader’ in the UK Wealth market demonstrates the difficulty of achieving cost efficiency with complex legacy books”
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What will be the drivers moving forward?
Value– Recognising the shift in the value chain– Proctor and Gamble to Tesco – Effect of regulation
Distribution – Different channels– Value of independence
Specialisation– Tax planning– Differentiation
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How Sanlam are positioned to respond
De-risking– Building process with advisers– Managing funds to risk categories
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Recognising the shift in the value chain
Joint venture discretionary fund management businesses
Investment partnerships
Product design
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Specialisation
Technical
Tax
Business consultancy
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Cost
Lack of legacy
New entrants
Niche
– Self select
– Section 32
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Brand
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Ambitions
Partner with up to 50 FA businesses in the post RDR world
10 joint ventures building to £500m per relationship
40 investment partnerships
Niche products – app on iphone
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The winners will be…
…“Those that align closest to distribution”
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Energising Together