Time might prove Peter Hargreaves' opinion right that only those life companies prepared to follow IBM's example and reinvent themselves as management consultants and service administrators to IFAs will prosper.
Consider the hard facts of today's marketplace – depolarisation, predatory mergers and acquisitions, purchase capriciousness, legislative overload, high costs of PI cover, compliance and people, IT dependency, product sameness, profit squeeze, and so on – and it is easy to understand why providers and IFAs are finding it problematic to construct economically viable answers to the questions that each faces, how can we distinguish ourselves from competitors and how can we grow our market share?
And therein is a conundrum in three parts. First, Peter suggested that few life companies have sufficient slack and skill in back-office processes to offer these out as a value-added service even to their key IFAs.
This implies that before life companies dilute their admin resource even more by servicing the needs of external users, they could provide the added value by enhancing their staff's customer relationship and process skills and ensuring the processes are super-efficient.
We might correctly suppose that there will be few other departments within life companies – Peter Hargreaves mentioned marketing, PR, internal reporting, recruitment and accounting – with the spare capacity to embrace the needs of others similarly.
Second, any worthwhile plan for developing a new breed of business consultants from a traditional salesforce – whose pedigree is not consultancy – demands from employers long-term commitment, training budget, time, continuous onand off-the-job learning support and, most important, revised performance metrics and a matching reward system that reflects the salespeople's very different, although enriched, role and responsibilities, none of which will happen overnight.
Third, and here I must ask a rhetorical question – shouldn't IFAs themselves take more responsibility for, and be adequately skilled in, the management, development and growth of their own businesses rather than rely on life companies? After all, surely life companies shouldn't be treated as cash cows?
In my business – a consultancy dedicated to helping IFAs (and providers) achieve bottom-line sustainability – we find that an approach on three fronts can resolve the conundrum.
First, there is much more than providing products that life companies could do to develop IFA-based distribution channels and help individual IFAs become more proficient in the business of business.
The culture in many IFAs is characterised by a belief that selling is king. One owner said to me: “We will sell our way out of trouble” – whereas the culture should be one in which commercial understanding, customer relationship management, process strength and accounting excellence rule.
Second, any life company that embarks on a programme of developing key account managers, or consultative sellers, must ensure that it – the company – is able to deliver the value-added services which are integral to real key account management. Business consultancy that is nothing more than window-dressing or marketing spin will prove to be a serious own goal. What IFAs want to know is that offered support is not merely a veneer but a measure of the wood from which the whole life company is cut.
However, what everyone must avoid is a provider running an IFA by proxy. IFAs must be responsible for managing their own businesses, making their own decisions, investing in their own systems and determining their own operating and strategic plans.
When we work with life companies to rethink their infrastructure resources to include provision for the support that IFAs seek and also work with IFAs to develop their self-sufficiency, we generate a strong push and pull effect that can measurably raise overall business proficiency and that helps everyone in the market, including consumers.
We advocate partnerships between life companies and IFAs, in which the company, through its trained salesforce, acts as a business coach and sometime services auxiliary and the IFA commits to delivering a reciprocal payback;and the IFA commits to an all points' internal programme of learning in business, leadership and change.
That leads to the third strand of our business development approach – partnership, or enterprise, management. Partnering at company-to-company level demands multi-channel relationships beyond the linear and one-to-one relationships typical of transactional(or product-only) selling.
It is not unusual for newly forming relationships of this complexity, magnitude and importance to benefit from an external facilitator who can act as impartial coach to the parties in their shared venture. Perhaps this is what Peter Hargreaves had in mind.
Peter Hargreaves has warned that “life companies face extinction unless they overhaul their business models and become management consultants to IFAs”.
As a soundbite statement, it certainly focuses the mind but it is probably far from the future case. Yes, they do need to overhaul themselves – the market challenges demand it – to achieve what Peter wants of the industry players. But one hand clapping is an impossibility – to create applause, everyone must contribute to IFA development, not least IFAs themselves.