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Adept adaptations

In recent weeks, we have seen an excellent example of common sense break out in the market.

I refer to the announcement that Friends Provident and Standard Life are to exchange valuation information concerning their legacy products with their respective platforms. My sources tell me at least two more providers are to join this initiative imminently.

These services are to be delivered by adapting the contract enquiry infrastructure that was put in place to support electronic delivery of valuation messaging between life offices and adviser client management systems. Reusing these already established services for an additional purpose is a logical way to deliver valuable information to advisers and their clients at minimal extra cost.

Indeed, if the contract enquiry infrastructure had not existed, there would almost certainly have been the need to put it in place to support wrap.

Seeing these services reused in this way makes me wonder how else this capability might be profitably employed. Having built an industry messaging architecture, let us use it as much as possible.

For example, the Government has recently decided not to proceed with its online pension forecasting project. This presents an opportunity for the industry to step in.

If we do it in the right way, I believe we can provide valuable information to savers while significantly reducing industry costs and even delivering some environmental benefits.

As an industry, we produce tens of millions of statements each year to pension policyholders. Many people have broadband internet access at home or at work and this provides an ideal platform to deliver communication.

How much more value would annual statements be if linked to online pension calculators that could not only forecast the value of benefits in one scheme but also aggregate the value of other pension contracts the individual holds? Nearly all pension providers offer such calculators on their IFA extranet or their group pension service. Instead of sending consumers a paper document, such tools invite them to provide information about their other pensions and to give authority for the provider to send a contract enquiry message to the other providers and aggregate the value statements.

In this way, traditional paper statements, which deliver limited information in a format that at best only a tiny fraction of the public will be able to comprehend easily, might be transformed into an interactive service that the policyholder or adviser may use to reach an informed view about the value of their pension and the need for additional provision.

The process might start with an email to the consumer notifying them that their latest pension statement is available online. By clicking on a link in the email, the consumer would be taken to the provider’s website to view the statement and access interactive tools.

This email might include details of the appointed adviser for the contract and their website. Where the adviser actively provides ongoing advice to their clients, notification might be sent to the adviser, say, two weeks before the electronic statement is due to be generated, so they may produce any analysis they want to deliver in advance of the provider e-statement being issued.

Alternatively, consumers could be given the option to send details of any analysis they may have carried out using the provider tools to their adviser and request further advice.

I would envisage such information initially being delivered between insurers via reciprocal agreements so that, in the same way as it is proposed that insurers will, at the request of the client, share information between their wrap services, so pension values could be exchanged between their interactive calculators.

Diverging views exist in the industry at this time over the legality of offering electronic statements in lieu of paper ones. An increasing number of providers are telling me that their legal departments are now satisfied that it is not legal issues that stand in the way of such progress, more a matter of what people are used to. There are others who believe there are still legislative issues.

The Government and the industry share a common objective to make consumers recognise the need to make adequate provision for their retirement. What better way can there be for the industry to encourage the Government to make any changes that may be necessary than to request them in the interests of delivering fuller information to consumers?

Reusing the contract enquiry infrastructure in this way could also be used to complement providers’ stand-alone portfolio planning. Ideally, advisers will increasingly be investing in sourcing these tools themselves, normally as part of their client management software. However, there are a significant number of advisers who have not opted to invest in this, so it would certainly be valuable for their clients if values of investments with other firms could be loaded on to such systems.

It is important to be clear that insurers have no reason to hold data on other products their customers may hold. It would be necessary for the client and adviser to request that they obtained and maintained such information. However, if the purpose were to produce more accurate guidance for the customer, where the adviser does not have such a system, there appears to be a sound case for such developments.

With the honourable exception of 1st Software, the effort put into deployment of contract enquiry has been pathetic.

Too many client management system providers have treated the service as a tick in the box to have on their system for sales purposes, with all too little investment being made in driving adoption among their users.

Some would argue that because of the variations in the ways in which providers have implemented contract enquiry, the system is too hard to use. If this is the case, the fact that providers will soon be sending messages to each other should clarify this and help identify where improvements can be made.

There are costs for providers in maintaining contract enquiry capabilities with each client management system provider. I believe the day is fast approaching when it will be reasonable for providers to set targets for the number of contract enquiry messages they expect each client management system provider to deliver.

Having built the infrastructure to deliver contract valuations electronically as an industry, surely we should make every possible use of it.

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