While some sees this in a positive light, there is no time to sit back and do nothing. The time should be used to review the principals of RDR and the impact it will have on your business.

FAnews asked a few people in the industry what brokers and advisers can do to prepare for RDR and what precautions they can take to avoid any harsh penalties for non-compliance. We believe we have a good mix between the life, short-term and compliance fraternity to bring you a very balanced view.

Although D-Day for RDR keeps on changing, it is a reality, and will not go away. What exactly does a broker/adviser need to change as a matter of urgency to be compliant?

Cornea Matthee – Centriq Insurance

Financial advisers should determine how their businesses will respond to the proposed RDR changes and assess the impact of RDR. They should determine which category the majority of their current representatives’ fall and assess the sustainability of their business when it comes to operating as a tied adviser or an independent adviser. Financial advisers should also do a cost projection once the new fit and proper requirements are effective, taking the type of adviser agency model chosen into account.

They should assess and define all income streams, and brainstorm solutions to increase or replace it with new income streams i.e. outsources fees and broker fees. Brokers should assess current business practices against what they expect the regulator will no longer permit i.e. multiple registrations as a key individual or representative; and determine strategic solution once RDR is implemented.

Lastly, they should engage their compliance officer, obtain a legal opinion, and if possible – participate in any one or more of the FSB RDR implementation steering committee work streams and attend industry workshops.

What if the broker/adviser is not RDR-ready when it officially kicks in?

Failure to consider the proposed RDR competency framework on your current business model may result in non-compliance with the proposed new regulatory regime. This could result in a material contravention of a regulatory requirement which may consequently lead to your license being suspended or a fine being imposed by the Regulator. Given the time allowed to ensure compliance, you may not have an acceptable excuse.

How exactly do brokers/advisers who have not yet done it, change their business?

Start with your appointed compliance officer to assist you with managing the regulatory risks. Ask an insurance expert to guide you on the impact of the RDR proposals on your business model. Engage with your strategic partners i.e. insurers on whose behalf you bind / UMAs you have intermediary agreements with and find mutual beneficial solutions. And finally, but most importantly, start engaging with your customer base on where the industry is going, and what changes it will bring about – especially in relation to fees. During this stage, you should put forward the value proposition you will be offering to your customers in the near future.

The FSB has very specific views about outsourcing. What can we expect?

The FSB is of the view that stricter outsourcing controls are needed, particularly in relation to investment management outsourcing, which has been deferred to the next phase of RDR. A few of the expected outsourcing models include:

• Advisers who hold binders to enter into (vary or renew policies will not be permitted to earn outsourcing fees for policy administration as this is implicit in the binder);
• Other advisers may not earn outsourcing fees for policy administration, unless the parties are enable to prove administrative efficiency that enable real-time data capturing, for example through direct capturing on the insurer’s platform;
• Fees for outsourced policy administration are expected to be capped. Although it has not been determined, 2% of the premium was initially proposed; and
• Conduct standards for outsourcing is expected to be strengthened to further reduce conflicts and increase the quality of the insurer’s oversight.