The real cost of service
Following the implementation of the Retail Distribution Review (RDR), the regulator quite rightly expects that there will be a service agreement in place between the IFA and their client.
It is unreasonable to expect that clients will tolerate their adviser receiving ongoing remuneration for no service.
The justification that renewal payments to the intermediary are some kind of “deferred initial remuneration” is at best redundant and at worst non client centric.
Payment for service will become the norm.
The use of technology will drive up the efficiency of review services and at the same time drive down the cost of delivery. Clients will expect much more from their IFA and anything short of yearly or better still half yearly formal reviews will fall well short of client expectations.
But this will not be a cheap service to deliver.
Those who have not to date delivered such a service will be quite astonished by just how much it costs.
This will have an interesting impact upon the market for the buying of client banks. Sellers expecting to receive more the 50 per cent of repeat revenue will have to have their expectations managed downwards.
No sensible buyer who wants to deliver an acceptable level of review service will be able to do that without the lion’s share of the repeat revenue. To do a deal on less than half of the revenue will result in under delivery to the client. And that is unacceptable.