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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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