Services for Financial Intermediaries
Overview
Financial services intermediaries have, since the Financial Services Act 1986 became law in 1988, been challenged by numerous issues and changes. Examples include: the Maximum Commissions Agreement, Commissions Disclosure and a number of Reviews; amongst them Pension Transfers and Opt-Outs, FSAVCs and split Investment Trusts. Throughout, the large majority of intermediaries have shown considerable resilience and for the most part thrived.
However, the advent of the Retail Distribution Review (‘RDR’) now increasingly referred to as the Retail Distribution Implementation Plan (‘RDIP’) combined with the credit crunch, which has arguably precipitated the worst economic climate for many years and potentially a severe recession, is placing many firms under significant financial strain.
Firms not only need to ride out the economic challenges that face them but now also need to review their strategies to plan for the impact of the RDIP, along with the parallel impact of the changes in Capital Adequacy that will also take effect in due course.
An in depth knowledge of intermediaries and their needs is required, to provide relevant advice and consultancy services to firms in this sector to address the significant market changes outlined above. Importantly, firms not only require advice and guidance but also, where required, hands on assistance to enable agreed changes to take place.
Some of the services which Rennison Consulting provides financial intermediaries are outlined below:
RDR/RDIP Audits
Issues
All firms need carefully to assess the impact of the RDIP, and how the proposed changes will specifically affect them, as the implications are far reaching. Only a minority of advisers have achieved Diploma status, and significant resources will be required to ensure those advisers who want to do, achieve the required level of qualification. Additionally, firms will need to consider the implications of adviser charging and also how they will train advisers to work on a fees basis rather than via commissions.
This audit will enable a firm to plan and prepare for the changes and develop particular strategies to address the challenges that the RDIP poses.
Content
The RDIP Audit is tailored to each client, and will include all or some of the following elements to address the issues outlined above and others particular to the firm:
- The impact of the professionalism requirements and the need to enable advisers to achieve Diploma status – QCA Level 4, and ways of organising and resourcing study and examinations etc;
- The impact on products and services and proposals as to how they might be changed/extended to address the requirements of the RDR as well as the opportunities that may be available;
- The requirement to operate ‘adviser charging’ and what training and also what changes in systems are required; and,
- The alternative strategies that the firm might adopt to re-configure its proposition to address the challenges and how to take advantage of the proposed changes.
Strategic Audits
Issues
Firms are increasingly confronted with a series of dilemmas. Should they develop the business and if so how? Should this include making acquisitions? Alternatively, should they plan to sell the business? In short, what alternatives are open to the firm and how should they plan for them?
Content
The Strategic Audit will address these issues and will include an analysis of some or all of the following:
- The ability of the firm to arrange a successful sale of those elements of the business which are likely to be attractive to prospective buyers;
- Identifying those elements which will need to be adapted or changed in order to improve the likelihood of successful sale and the value of the business;
- A review of valuation methodologies in conjunction with the firm’s other professional advisers and which are likely to be most appropriate and advantageous;
- An assessment of the ability of the firm to make acquisitions and, in conjunction with the firm’s advisers, what financing options are likely to be the most advantageous;
- An assessment of likely purchasers/investors and their ‘fit’ with the firm’s aspirations, ethos and culture;
- The relative merits of a full sale compared to a partial sale/investment by a third party;
- How some members of management can exit to achieve a transition to the ‘next generation’ and the financial implications and practicalities; and,
- The identification of suitable professional advisers to achieve a sale/ investment.
Proposition Audits
Issues
Intermediary firms will need to review their proposition going forward. The type and mix of products and services is being impacted by a variety of factors and events including: the economic environment, changes in provider remuneration, and changes in legislation such as Personal Accounts together with the implications of the RDIP.
Content
The audit will encompass some or all of the following elements according to a particular firm’s needs:
- A review of the products and services provided to clients matched against adviser competencies and the firm’s infrastructure and identifying if there are gaps;
- The impact of moving to a different product and services mix;
- Analysis of provider relationships and the margins and identification of strategies to improve them
- The impact of ‘Adviser Charging’;
- The training and development needs of the firm to achieve its objectives; and,
- The appropriate IT infrastructure and platforms needed to deliver the desired proposition – in particular Wrap platforms.
Management Audits
Issues
A challenge facing firms as they seek to grow and change is identifying the appropriate management to carry through this change. In many cases, the firm will have grown with the founders undertaking all the major management functions, whether sales, marketing, finance or HR, etc. As firms seek to grow and adapt to changing circumstances, the need to thoroughly review the competencies of existing members of the management team against the firm’s future needs will become a key determinant for future success.
This audit will enable firms to address these and any other aspects particular to them so that they can ensure that the right management team is in place to deal with the challenges facing it.
Content
The elements of the audit will address the issues outlined above and will include:
- Provide an impartial review of a firm’s management matched against its strategic objectives;
- Identify gaps and proposals to address them; and,
- Will identify training and development needs – for example access to coaching, and how and where to access those requirements.
Business Planning Audits
Issues
Intermediaries need to plan effectively and one of the foundations is a well constructed Business Plan that can act as a reference point rather than being consigned to a drawer once completed.
Many intermediary firms have the information that they need but struggle to bring the elements together and then to analyse.
Content
Elements will, according to the needs of the firm and its existing internal resources, include:
- A review of the planning process and cycle;
- The content required by different parts of the firm;
- How information is currently sourced and potential efficiencies;
- The regulatory impact and reporting requirements
- The requirements of investors and shareholders
- The Management Information (MI) required to monitor the business plan; and,
- Identifying Key Performance Indicators (KPIs).
Delivery
The delivery of each audit will be tailored according to a client’s particular requirements. Typically, an initial meeting to agree the scope and content will be followed by either a workshop to agree and prioritise issues or a meeting with selected members of the senior management team. This is typically followed by information gathering usually via individual one to one meetings. A draft report will then be issued and can either discussed with the directors on a one to one basis or presented collectively and after feedback, a final version will be issued.
Thereafter, ongoing assistance with implementation of specific aspects can be provided as mutually agreed.
Selection and Management of Product and Service Providers
Issues
The effective selection and management of providers for particular products and services is critical to a firm’s success as well as having regulatory and risk implications. There are client, commercial, and service implications that need to be addressed if a firm is to trade successfully.
Content
The specific areas will include:
- The review, and if appropriate, amendment or design of selection processes;
- Co-ordinating/managing ‘beauty parades’ for selecting specific products, or the construction of panels, or the selection of ancillary services – for example, portals and Wrap platforms; and,
- Advice on the ongoing management of provider relationships including MI.
Delivery
This will vary according to whether only a review of existing documentation is required or if in addition, meetings with providers need to take place.
Corporate Governance and Risk Management
Issues
Firms are increasingly required not only to document but also demonstrate that their governance processes are effective and that management of risk is thoroughly embedded within the business. There is increasing complexity and firms should not hesitate to take advice to ensure they run their affairs compliantly.
The FSA has signalled that it will be continuing to closely monitor firms’ approach to TCF and also that it will be holding individuals more accountable. As a consequence, firms need to ensure their strategies and actions in relation to managing risk and embedding TCF, are robust and effective.
Content
Assistance is available in the following areas:
- The review of Role Profiles and in particular board appointments;
- The role and operation of board committees;
- The effectiveness of a firm’s TCF strategies; and,
- The organisation and operation of risk management structures.
Delivery
This will be tailored to the particular needs and circumstances of each client.
Interim Management
Issues
Some firms, will on occasion, whether through illness, retirement or resignation, have a short or medium term need for management support.
Delivery
We will either provide or identify suitable qualified support matching the right person to the role and agree objectives and timescales.
