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7-step guide to avoiding Sunset revenue shock

The clock is ticking to move clients to unbundled charging before the April 2016 deadline. But by following some simple steps advisory firms can develop their businesses and look forward to the future, says Sam Christopher, head of Proposition, Cofunds   

There is now little more than a year before the 5 April 2016 deadline, after which investment platforms can no longer accept payments from a fund’s annual management charge (AMC) and must move to an explicit platform charge – a side-effect of which is effectively the switching-off of any remaining trail commission for all platform based advised business.

As an adviser, the significance of the 2016 ‘Sunset’ deadline depends on how much of your existing business is still commission-based. If most clients are affirmed to pay you explicit fees for service, it should be a minor issue to move remaining clients over. If, however, a significant part of your income still comes from trail commission, urgent action is required to ensure you don’t suffer a significant revenue shock come 6 April 2016.

Transitioning clients’ investment books to a fee-based model can be challenging, especially when trying to run your business at the same time. But understanding the steps involved and drawing on the support of your platform can help. The process can even provide valuable insights that can help you determine the future direction of your business and the sort of clients you want to target.

A seven-step guide to meeting the Sunset deadline

  1.   Create an action plan

The first stage is to create your action plan detailing the steps your business needs to take between now and 5 April 2016. Take into account holidays and busy times, such as the end of tax year and client review periods. Key elements to consider are:

• Your end goal. What’s your goal or target? What do you want to achieve? Do you want to move all clients across, or perform further analysis to decide how you will work with different client groups in future?

• Your people. Who in your business will be responsible for the Action Plan, and who else will be needed for specific activities? How much training will be required, and how much time will you allow for these activities (days, weeks, months)?

• Your resource. What costs do you anticipate, such as overtime, mailings and client meetings?

2. Analyse your clients

Sunset offers a valuable opportunity to step back and take stock of your whole client bank by age, activity, goals, needs and level of assets. This can help you see what services you should be offering in the future, and help you focus time and resources on the clients who are most likely to value what your business offers.

As part of this process, try to assess what assets clients may have elsewhere which, if consolidated on a platform, can help to make re-engagement cost-effective.

To help, our Sunset web pages include a simple model that shows how to conduct a full analysis of your entire client bank – not just clients or assets held on Cofunds – in six simple steps.

3. Determine revenue at risk

It’s important to determine how much your business will be affected by Sunset. Management Information (MI) data is invaluable in enabling you to see how much of your revenue is at risk. Data can also show you which clients have still to agree to pay your adviser charges and platform charges, as well as which types of funds they hold.

4. Develop your services

If you already have clients operating on a fee basis, the chances are you already have your client propositions up and running. But there are still plenty of firms that still have to decide what ongoing services they will offer clients once they are operating on an explicit fee basis.

Alongside thinking about the services to offer to those clients you want to continue offering full advice to, you may want to consider how to support those clients who aren’t appropriate for your full fee-based advisory service, with alternative options including self-directed and light-touch advice services.

5. Set up on platform

You should now be ready to set up your client services. At Cofunds, we aim to help make this straightforward to do – enabling you to set up as many client segments as you wish online and assign appropriate fee models to each service, whether comprehensive or light touch (including service and subscription charges for self-directed services). You can also select the method for collecting payment from client assets – such as Fund Sale Instruction or Sale for Regular Payment – so that your remuneration continues to be received. automatically

 6. Engage with clients

By now your services (whether advised, light touch or self-directed) should be clearly positioned, and your chosen fee models and payment processes set up on platform. Now you’re ready to introduce clients to the ongoing service that’s most appropriate to their needs.

Given that there may be clients who haven’t been contacted for some time, this process may require a number of engagements and therefore needs to be initiated as soon as possible.

7. Convert to clean share classes

Once clients have agreed to a service and fees/charging model, the final step is to convert their holdings to commission-free share class funds. On our site, you can find share class conversion packs and online tutorials.

 

Support materials on the Cofunds website

At Cofunds, we’ve created a dedicated section on the website, with guidance notes, tools and templates to support you through this seven steps process.We’re committed to making Sunset the start of a bright future for every adviser firm. For more on all seven steps and all the literature and material required to convert clients on Cofunds, log in and follow the homepage link.

Go to Cofunds website

 

 

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