Speaking at the Westminster and City ‘The Future of Wraps and Platforms’ conference today, David Thompson, managing director of marketing and distribution, AXA Wealth, explored how RDR compliant distribution models and current market conditions are driving market change, and how client needs and demands are altering.
For wraps and platforms to achieve operational efficiency of scale while meeting client needs, platform propositions need to evolve to reach mass market and less affluent consumers. D2C and B2B2C are set to play a key role in delivering less complex investments to this fast growing group. This, Thompson predicted, is a huge opportunity for advisers and platform providers.
Thompson said: “I predict a boom in both 'direct relationship' - direct investing via an advisory firm, and 'direct transactional' - pure D2C - as a predicted 40mn clients become orphans as a result of RDR .
“Not only are platforms making it easier for clients to manage all their assets in one place, they are also making it easier for clients who don’t need full blown holistic financial planning to have access to more simple investments and to construct simple investment portfolios themselves.
“Significant parts of the mass and less affluent segments are at risk of being squeezed out post-RDR as the cost of advice will not be attractive. Lower cost and more easily accessible non-advised investment services are therefore required to serve this segment, which is increasing anyway. A non-advised investment offer can sit alongside an advised offer neatly to match the different needs of the customer and will present a much more services based approach. This is why I believe B2B2C is a very important business model as well as D2C.”
To be successful in this market, Thompson suggested advisers and platforms need to consider a few rules. He said: “Remember, it is a myth that non-advised offers are less regulated than advised. This is not true, it is merely different regulation - perhaps an argument for introducer based B2B2C, which protects the distributor from significant levels of risk.
”Aim to take the hard work out of investing! We put too many hurdles in front of investors, so we need to make the overall customer journey as simple as we can. If we don't, investors will go elsewhere. It's all about the client experience; online in particular needs to be best in class and transactions real time. This means we need customer insights, far beyond levels typical in this sector.
”Take-up ultimately depends on marketing capability – someone needs to be bringing good capability to the table otherwise it is not worth the bother (even if you have a database of millions). Finally, brand is also incredibly important in attracting customers.
”There is no doubt that the non-advised market is set to grow, some estimates suggest by circa 70% over the next year or so, as most advisory firms transform their businesses and align behind either an independent, single-tie or multi-tie model.
“Is direct a threat to advisers? No, I don’t think so. The once frowned upon idea of marketing investments direct to consumers now seems to be increasingly embraced by professional advisers, at least if the latest AXA Wealth/YouGov research is to be believed, with over 60% saying they are not threatened by such a service.
”There is huge change sweeping through the industry and advisory models are changing. Both direct to consumer propositions and the growing importance of workplace pensions are ushering in a new wave of innovations and market opportunities for both advisers and platforms alike. Far from being a damp squib, I see RDR as an opportunity for the industry to respond to the technological, socio-demographically, and cultural shifts spreading like a pandemic across the UK and around the world.”
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