UK Retail Distribution Review: Key Challenges and Implications for Change and IT

by Jamie Macgregor, November 1, 2011
Industry Trends
EMEA

Abstract

There are less than 14 months to go until the UK Retail Distribution Review (RDR) takes effect, and many life and pension companies are in the middle of planning their implementations. New standards of professionalism and transparency are driving major change across the life, pensions, and retail investment industries.

Due to start on 31 December 2012, this legislation will introduce major changes to the way that new long-term savings and investment is sold across the UK (the most notable of which is the move from product-based commission towards transparent advise charges). In a new report, Retail Distribution Review: Key Challenges and Implications for Change and IT, Celent looks at the opportunities and challenges that this regulation presents and considers the potential implications for technology.

“With potential spending of up to £150 million being forecast among product providers to implement the compliance changes in 2012 alone, and with more being planned to support new propositions beyond 2012, this regulation has the promise of forcing major structural change across the industry. Next year will be tough as many firms seek to deliver the minimum compliance changes across their complex legacy landscapes alongside other regulatory priorities, and at the same time work out their distribution strategy and future propositions,” says Jamie Macgregor, Senior Analyst with Celent’s Insurance group and author of the report. “The roles of the change and IT communities are critical to help the business navigate changes and deliver business value.”

This report reviews how RDR regulation will impact the industry, exploring some of the key operational and technological challenges for distribution and product providers, and examining the implications for the role of the change and IT directors.

Trends and data discussed in this report reflect Celent’s experience of the market based on ongoing discussions with the industry and, specifically, 22 interviews conducted across both the industry and technology partners supporting the implementation of RDR as well as a survey across five of the top product providers (representing approximately 40% of the market) to understand their level of readiness.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

4

 

Report Methodology

4

 

Target Audience

5

UK Market Context

6

 

Typical Industry Value Chain

8

 

Industry Trends

9

Retail Distribution Review: An Overview

11

 

Raising the Level of Professionalism for Advice

11

 

Improving the Definitions for Advice

12

 

Moving Towards Adviser Charging

13

 

Recognizing the Role of the Platform Business

14

 

Outstanding Items of Policy

15

Opportunities and Challenges Facing Distribution

17

 

Potential Strategic Responses

18

 

Key Operational Challenges

20

Opportunities and Challenges Facing Product Providers

21

 

Current Implementation Readiness

21

 

Potential Strategic Responses

23

 

Key Operational Challenges

25

Impact on the Value Chain and Partners

29

 

Impact on Other Parties in the Value Chain

29

 

Impact on the Technology Industry

29

Implications for the Change and IT Directors

32

 

Understanding the Impact

32

 

Longer-Term Opportunities

34

Final Thoughts

35

Appendix: Impact of the Regulatory Environment on RDR Plans

36

Leveraging Celent’s Expertise

38

 

Support for Financial Institutions

38

 

Support for Vendors

38

Related Celent Research

39

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