Will RDR see the end of advice in the bank branch?
In principle no one can argue with the requirements of RDR that customers should expect to be given advice by qualified people who can either advise about the whole market of investment and insurance products or make it very clear that they can only advise on a restricted set of products from a restricted set of providers. Equally in principle no one can argue that if the advisors are providing value with their advice that the customer should pay for that advice and that the customer should be free of the concern that the advice is being influenced by the amount of commission that the advisor is being paid.
The challenge for the banks is that in order to get their staff up to the standards to pass the qualifications to be allowed to advise customers requires a significant investment in training and when compared with potential returns from the sales that they generate from the mass market in the existing business models for some banks, such as Barclays this looks financially unattractive. Hence why Barclays is moving to a model of pushing the mass market i.e. those with relatively low levels of investment, to online channels, whilst still providing face-to-face advise to customers who qualify for the Barclays Wealth proposition.
Of course this all depends on how you evaluate the business case. Certainly if the case is evaluated specifically on the cost of sale and the revenue generated as a standalone product sale, then it is difficult to make the case in a post-RDR world (post 2013), to provide in-branch advice to the mass market. However if the overall enhanced customer profitability of cross-selling customers insurance and investment products, many of which are seen as “sticky” products, and the impact on customer retention and customer advocacy is taken into account then the business case for advisors improves.
Another way to improve the business case is to improve the productivity of the advisors. Some of the ways this can be achieved range from simple measures such as more effective appointment management and more effective sharing of advisors across groups of branches to the provision of more effective technology enabled tools to the use of video-conferencing advisors into branches, reducing the time lost due to the advisors travelling to branches. As video-conferencing technology costs reduce and the technology improves (as with Cisco’s TelePresence), the resistance of customers to video-conferencing will also drop.
Will other banks follow Barclays’ lead and will the mass market be left without in branch advice in a post-RDR world? It is highly unlikely, particularly as banks such as Santander, HSBC, Lloyds Bank (with their ‘For the journey’ branding they would need to re-think their branding if they did) and RBSG (who have just announced the launch of the sale of two new funds) as they look to re-build trust and provide a differentiated service will follow that direction. RDR however does provide the banks with a significant catalyst to re-think how they provide advice to their customers.