Firstly and closest to home, the retail distribution review (RDR) may be still a discussion paper, but it is likely to heap greater responsibility onto advisers.
These include higher minimum qualifications (QCF level 4), a new model for adviser remuneration and increased costs in the form of new processes, administration requirements and literature. The result is likely to be a smaller (but more qualified) group of corporate advisers. Those remaining will inevitably have to review their business models: the choice is to remain independent, become restricted, or leave the industry altogether. Secondly, business models will also have to become adaptable to the introduction of pensions reform in 2012.
Some employers may look to reduce costs by moving to the personal accounts model. Advisers will undoubtedly face a higher administrative burden with no extra remuneration and providers will be forced into developing new products and customer retention strategies.
And thirdly, pressure will be on providers too to reduce costs and develop new products for both existing and new customers. All of this is taking place in the context of a highly uncertain economic climate, as well as the undercurrent of mergers & acquisitions activity facing many life assurance companies. Providers too will have to reassess their business models.
In looking to the future, life assurance companies and corporate advisers alike must address these questions. These challenges are going to remain our checklist for the next five years. Are you ready?
Mike Web
Senior Business Development Manager at Standard Life.