Hold on to your hats. It’s going to be a big six months.
The Olympics are on our doorstep, auto-enrolment is less than a hundred days away and the Retail Distribution Review will be born in the new year. Successful implementation will justify a pat on the back for Seb Coe, our industry and our stakeholders (I modestly suggest).
But there’s no room for complacency. The famous words of Winston Churchill, who was a customer of Aviva, sum it up well. “This is not the beginning of the end. But it is, perhaps, the end of the beginning.” Our responsibility is to make it a great beginning for all our customers.
Aviva has been a long-standing supporter of RDR – increased transparency, professionalism and quality of advice. What’s not to like? The focus, however, now turns to the challenges of transforming these aims from theory to reality.
Few of us like change. But let’s once again turn to Winston for some words of inspiration. “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Let’s try to keep our cups half full.
In our corporate market, RDR raises the topic of consultancy charging. Aviva believes that consultancy charging is a good solution. It satisfies the rules and aims of RDR, while providing a flexibility that helps employers pay for advice. We are committed to supporting its adoption.
We are also aware of the challenges. Whatever your thoughts on the merits of commission, it has been long-established means of adviser remuneration. This will now change. Consultancy charging will place a new spotlight on remuneration. New questions will be asked. Clear answers will be required.
Today’s economy is also straining confidence. For employees, the cost of living and job security dominate concerns. For employers, thoughts of cost constraint come before those of expansion and investment. It is into this pressured arena that we launch consultancy charging. Low levels of confidence will demand high levels of education.
At the same time as RDR, auto-enrolment will also be in full swing. Keen attention is being paid to opt-out rates. Will sceptics rush to hail it a failure if opt-out rates rise above a certain level? Our research already shows that over a third of employees are considering opting out. Without careful communication, the introduction of consultancy charging could inflate this number even higher.
Change breeds uncertainty. For example, we’ve seen recent speculation that HMRC guidance could derail the principles of consultancy charging. For the record, Aviva fully anticipates this guidance will be reviewed to permit consultancy charging to pay for services to the employer. Fast action will be needed to nip any other uncertainties in the bud. As Winston said, “a lie gets halfway around the world before the truth has a chance to get its pants on.”
Aviva is conscious of these challenges. That’s why we have invested in modelling tools, adviser education and literature to support the market. We’ve also committed to providing the full range of remuneration options – consultancy charging, fees, and commission where permitted – to let our customers find the solution that is right for then.
I’d be interested (and will brace myself) to hear your feedback on today’s challenges. My e-mail address is alistair.mcqueen@aviva.co.uk. But in the meantime, I’ll let Winston have the closing words. “Difficulties mastered are opportunities won”.
