Background

The Retail Distribution Review (RDR) discussion document was published by the Financial Services Board (FSB) in November 2014, against the background of the Treating Customer Fairly (TCF) approach to regulating marketing conduct in financial services.

The RDR proposal outlined specific regulatory proposals to increase transparency and improve financial advice standards, thereby ensuring customers receive fair outcomes when purchasing financial products.  These proposals are aligned to the broader financial regulation reform of the proposed Twin Peaks regulatory model, ensuring any advice given is suitable and takes into account the customer circumstance.

The RDR has captured research findings and subsequent proposals for changes to the financial services industry; including balancing the relationship between financial advisors, product owners and customers in the distribution landscape. Implementation is expected from late 2016.

What does it mean for your industry?

A common perspective in the local industry is that ‘equitable fees’ is being translated as ‘cheaper no matter the product’.  As per this perspective, if you’re in the insurance industry you may be considering the implications for your business, specifically whether the implementation means loss of competitiveness and/or revenues. Rest assured, the spirit of the RDR is about achieving fairness, driving transparency and value for customers, intermediaries and insurers. In the industry customers are often perceived as coming second, therefore the intangible term ‘value’ should be considered equally for customers, intermediaries and insurers.

What is the expected value?

The RDR will certainly drive industry change as new business models, with the aim of delivering clearer customer interactions, will have to be critically evaluated. While change causes nervousness, those willing to embrace the concepts of the RDR have the potential to keep ahead of the pack by:

• Evaluating customer and user experience expectations
• Evaluating strategic business imperatives, data-driven decision-making and industry collaboration
• Delivering on the new considerations through sustainable customer-centric solutions

If you would like to understand the impact of the RDR on your business and customers and how best BSG can support you to embed key regulatory principles in your distribution and operational environments contact Dave Baxter, David.Baxter@bsg.co.za, +27 (0) 83 985 5606, www.bsg.co.za.