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Back-office to the future

For many years, the supply chain that links the IFA sector and the life and pension product providers has remained pretty static.

Applications generate

d by the financial adviser through analysis of client needs pass through

the branch and/or head office of the IFA to the product provider.

The provider processes the application, performs necessary underwriting

and then returns policy details to the client and commission details to the

IFA for accepted applications. Ad hoc policy valuations are handled

manually. Process flows between the IFA and product provider are

paper-based and often duplicated. Delays and errors in processing are

inevitable and admin costs are huge.

For the IFA, in particular, this supply chain throws up a number of issues.

Financial adviser productivity is often not optimised, due to paper-based

fact-finds, labour-intensive advice construction, and copious form-filling.

Many of the information flows needed to get the business “on risk” and

under administration are manual, with data keyed and re-keyed several

times, introducing unnecessary costs and errors.

Reconciliation of commission with product providers is manual, often a

lengthy process with resultant cashflow implications.

Portfolio valuations are undertaken manually, with big admin overheads for

the IFA and product providers.

There is limited opportunity for marketing, with inefficient lead

management and little opportunity for crossselling and up-selling.

For most IFAs, the web is at best an advertising mechanism rather than an

oppor-tunity to do business – whether business to consumer (B2C) or

business to business (B2B). Individual product provider extranets do

provide a limited solution but they provide no opportunity for data

aggregation across providers.

At the same time that the supply chain remains largely intact, the

financial services industry is undergoing a substantial structural

transfor-mation. Changes in Government legislation and new, web-based

competition have increased the pressure on traditional IFAs. Mergers and

acquisitions have increased business scale, highlighting the pressure for

efficient business admin. Competition for market share between

intermediaries is driving a trend towards the provision of integrated

retail financial services and the result is a coalescence of the

traditional markets. There has to be a concerted and co-ordinated effort by

the industry to rebuild the traditional supply chain.

One of the organisations involved in this process is Towry Law. Chief

operations officer Keith Webb says: “There can be few more pressing needs

than the redesign and re-engineering of the way the life and pension

industry has over-managed its business processes.”

Towry Law is transforming the way it does business, using information

technology solutions as a catalyst while recognising the key differentiator

is the relationship that the IFA has with their clients.

A strategy to utilise diff-erent distribution channels effectively has

been adopted while integrating these into a single back-office admin

solution with increasing links to provider systems.

While there is much hype regarding the use of the web – and increasing

evidence that many people will use the internet to get information about

financial products and services – most people want to discuss their

financial needs with a financial adviser.

For example, one of the fastest-growing demographic groups in their use of

the internet is the over-50s, the so-called silver surfers.

Evidence suggests that this group will spend a long time in researching

financial needs but will want the reassurance of talking to a financial

adviser before making their decision to buy.

There is a big difference between a consumer picking what they believe to

be the right financial product over the web and receiving considered and

appropriate financial advice, whether face to face or via a call centre.

The internet may prove to be a valuable distribution channel for priceor

convenience-based consumers but the increasing complexity of financial

services legislation and the sheer scale of competing products and services

means there has never been such a need for truly independent advice.

The need is for a holistic approach to be taken towards different

distribution channels. Consumers must be easily navigated from the web to

the call centre and, where appropriate, for a face-to-face meeting with a

adviser to be arranged. But it is important that the same questions are not

being asked again and again and data keyed and re-keyed. Information

technology has a role to play but these are generally business process


However, traditional paper-based processes do not lend themselves to

optimising the sales process and perpetuate re-keying of data across the

supply chain. IFAs such as Momentum have invested in new, laptop

computer-based systems for their advisers. Data captured at the

point-of-sale can automatically be transmitted to the IFA backoffice for


Momentum IT director Peter Morris says: “We knew from the outset that we

would eventually need to tie the front and back-office together to offer

our customers the level of service they have come to expect, and to reduce

further our admin costs.

“The ability to meet these challenges in a world where the customer is

king and in an industry destined for 1 per cent margins is critical.”

So, we can see that leading IFAs are tackling the challenge of

transforming their part of the supply chain. They are also taking a

realistic stance about the opportunities the internet provides for the

industry. What is now needed is for the product providers to work closer

with IFAs to refine the business processes and take advantage of what

information technology can now offer them – across the entire supply chain.

The back-end processes also need to be optimised – including electronic

links to product providers for valuations. This is one area where the costs

of doing business manually for the IFA and the provider are huge. The trend

towards data aggregation, especially in the US, should provide a clue as to

the likely direction the financial services industry in the UK will – or

will be forced – to take. The risk to traditional life and pension

companies is that the use of data aggregation is more sophisticated in US

banks and finance houses.

The introduction of stakeholder and the movement towards 1 per cent

margins has led to the need to focus on reducing the cost of doing

business. This means eliminating the duplication between the back-office

tasks of IFAs and product providers and generally transforming the supply

chain, both B2B and B2C.

Organisations which successfully address these changes will be able to

capitalise on new industry initiatives and meet the changing expectations

of consumers.


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