IFAs can build on their traditional competencies and compete with the increased competition in the financial advice arena by utilising modern account aggregation.
Aggregation is one of the latest trends in online financial services. It offers consumers a single point of access to all their online accounts.
It also gives IFAs the opportunity to extend financial advice to span the complete spectrum of a client's financial affairs. To that end, IFAs should be the winners in bringing this idea to the market – if they can take fast action.
Aggregation services will over time fulfil one of the core functions of advisers. The services electronically consolidate a client's bank and building society accounts, insurance policies, unit trusts, pensions and direct investments to build a picture of their overall financial position. Unlike the traditional fact-find, these real-time services keep a client's financial affairs up to date.
They can also consolidate Air Miles, computer game scores and anything else the consumer cares enough to want as consolidated information from which to manage their personal affairs.
Consumers like these sorts of services and about 25 per cent would appear to make use of them when offered. Experience in the US and Australia indicates that aggregation makes sites very sticky.
Imagine if, whenever the consumer looks at their account information, they are offered the opportunity to see if they can get a better deal. Simple products such as Isas and stakeholder pensions are well suited for self-service. Better still, imagine there is a link to the adviser so, at the touch of a button, consumers can get in contact to test their plans. This is all well beyond the capability of most current IFA websites that typically offer little more than brochure-ware.
Affluent consumers have always had personal bankers, yet aggregation technology could enable IFAs to provide private banking levels of service to more of their customers for a few pounds a month. It also offers the ability to automate many of the connections between consumer and IFA.
For many years, IFAs have been exhorted to automate their business and transactions with insurers. Ultimately, progress has been hampered because this has meant that the burden of entering data has fallen on the IFA.
Here is a chance to tap into a development that will have consumers building and maintaining their financial records online. Furthermore, it offers an opportunity to support low-margin business in a cost-effective way, as well as tying the consumer to the adviser as their main point of contact for financial advice.
Financial account aggregators can also provide consumers with information on their utility and phone bills, which fall outside the traditional financial arena. There should be an opportunity for enterprising advisers to extend the range of advice they offer. At the same time as insurance and savings products are becoming simplified, the consumer is faced with bewildering choices between utility and phone tariffs. These are not trivial sums as many families' budget for utilities and phones will exceed their non-mortgage savings.
Imagine that, alongside life insurance, credit card and pension calculators, the IFA could offer calculators and prompts that let the consumer know when they could get a better deal for their utilities and communications. Savings for the consumer could be hundreds of pounds a year and add to the perceived value of financial advice.
But while anyone can offer financial account aggregation, only organisations with a route to financial transactions look likely to make money out of offering this sort of service.
So far, UK financial institutions have been half-hearted about the concept. While banks could increase loyalty and cross-selling opportunities through aggregation, there is also a risk to their margins. Imagine what banks may feel about customers who can easily and quickly minimise their charges and maximise interest on their accounts. Banks know that if any substantial financial institutions offer this service, they will all be forced to follow.
Individual IFAs are not likely to have the resources or expertise to develop these services. However, the bigger institutional brokers and networks should all be looking at how they can develop a service that can be offered by their advisers. The key elements they will need are as follows:
A financial account aggregation service for consumers through a branded website. This needs to offer the consumer all the accounts they want to aggregate, regardless of whether the IFA can use them in a financial planning session. Remember, the consumer is likely to use the service that focuses on their needs, not the adviser's. Potentially, the best place for this to be set up is as part of the financial planning process.
Financial planning tools that encourage the consumer to explore their financial needs and enable them to buy and service their finances online. This is a way to make money from low-margin products.
An easy way to share plans with the adviser.
A link to the adviser's desktop and laptop systems. This enables the IFA to update fact-find data automatically, saving time and enabling them to make proactive suggestions to the consumer.
IFAs should take the opportunity to extend their traditional services with online account aggregation. They will be able to better service and retain their valuable customers while strengthening relationships with their clients. IFAs should capitalise on the opportunities that account aggregation affords. If they do not, the banks surely will.