Does RDR apply to protection pricing? This one appears simple. No. Job done. But in reality it isn't that simple.
While it is true that RDR is shockingly silent on the whole protection industry, if the question had been "does RDR have relevance for protection pricing?", then the answer would have been ‘yes'.
RDR is all about being clear and transparent about charging structure, something that the traditional protection market has completely failed to achieve. Many proponents of the status quo argue that highlighting the commission earned is sufficient, regardless of the fact that it might say 240%. And many advisers get away with this on the basis that consumers have little to compare this to and have no sense of what this actually means.
To be fair, some advisers do automatically rebate commission in full and then charge a fee for their advice, directly in line with their charging structure for advice on assets. But they are in the minority.
My experience is that most advisers see a protection sale as a route to earning back some of their now lost revenue, easily. But to point fingers at advisers is unfair as they are only working with what is available - the products are provided by carriers (although probably, on the basis that indemnity commission is what is wanted.)
Protection is now moving towards integration with platforms with pricing structures that are RDR compliant. My expectation is that all legacy protection products now will get re-invented for the platform world. It is only a matter of time before protection comes into line with what is happening under RDR legislation and integrating with platforms is part of that.
This will not just be for high net worth clients with investments on platforms through their wealth manager IFA. It will be for the mass market as well and for any cover that gets used. And that will be for both advised and non-advised sales. Never let it be said that the Life industry is dead to change.
Steven Mendel is chief executive officer of Intergrated Protection Solutions
