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Big worries for smaller companies

Stakeholder marketing, e-commerce opportunities and payment methods are some of the factors giving small IFAs sleepless nights, if the views expressed at last week&#39s Aifa conference are anything to go by.

The opportunity to exch-ange ideas and air grievances was given to small IFAs.

Led by Alexander Beard Group managing director Paul Beard, IFAs held an open forum to discuss topics affecting small firms.

To no one&#39s surprise, sta-keholder was high on the agenda. The overall message was that time is short and IFAs need to act now. Instead of sitting back and waiting for clients to approach them, intermediaries should go through client lists and contact everyone affected.

Rather than concentrating on employers, the feeling was that IFAs should speak to clients that are employees without a pension. This is a neglected market – when one employee is without a pension it is likely there is no company pension in place.

Educating an employee about stakeholder could open up a whole new marketplace. The employee will not only approach their employer asking about the company&#39s sta-keholder intentions but will also discuss the situation with colleagues.

Contact with one client could snowball into business from a whole company. It is an opportunity not to be ignored.

It seems stakeholder may frighten IFAs with its lack of clarity, but it frightens employers more. Employers are likely to bury their head in the sand and hope it goes away. It is up to IFAs to make them face reality and act.

If IFAs are not going to contact employers it is certain that the big institutions will. But IFAs have a much better chance of taking this business than tied agents. If an employer is seeking stakeholder information, the feeling is it is unlikely an opportunity for independent advice will be turned away.

Ultimately, intermediaries need to get their clients to talk about stakeholder and to talk about it with IFAs.

Many of the life companies are producing generic material that IFAs can send to potential clients. An even easier step is to hire a telemarketing company to do the donkey work for you. Not all the recipients will take the time to read through the literature but informing employers about stakeholder will raise curiosity and could generate new business.

IFAs not intending to promote stakeholder because of the low cost and perceived lack of income were reminded that attracting new clients with stakeholder could lead to additional business. Stakeholder is seen as an easy way to get more clients on the books.

E-commerce is seen as another way of attracting new clients but many of the small IFAs are not seizing this opp-ortunity. A growing number of intermediaries are using the internet and email but there are still IFAs who fear this technology.

Email may lack security and be a target of viruses. On the plus side, it is a time and cost-efficient way of communicating information to clients and is regarded as more professional than faxes. IFAs believe email could also boost their profile because it signifies to clients that they are moving with the times.

Setting up a website might not bring in a vast income now but it is the future of the industry. Business in this area is already starting to improve. There are specialist companies that will design and regularly update websites and so it will not mean extra work.

IFAs can have their website linked to all the major search engines without needing technical knowledge. Life offices are setting up links with IFA websites, often at their expense, giving consumers access to background information.

On the whole, the IFAs were confident that websites would not replace face-to-face advice. Instead, web technology was said to be proving useful in business-to-business communication and back off-ice work.

Intermediaries say they have to take a firm stance with the internet companies. They say the companies should react to IFAs&#39 needs, not the other way around. Beard said this also applies to life offices. “We are giving the life offices business. We have to say what we want from them – we have to dictate.”

IFAs can demonstrate this new-found direct approach by asking life offices to produce one standard application form, which they have been calling for a long time.

Changing old habits is not only the task of IFAs. Clients frequently ask for what they want and a common request is to pay by fees rather than commission. This is a method of payment which is becoming increasingly popular, according to the smaller IFAs. Clients feel more comfortable with fees as they are used to paying accountants and solicitors in this manner so IFAs need to be prepared to adapt their systems.

A system which uses commission to pay the fees was suggested. An hourly fee is agreed with the client and then a simple spreadsheet can be designed with credit and debit columns.

Every time work is carried out on a client&#39s affairs, a fee is placed in the debit column and all commission received is put in the credit column. A statement can be issued periodically stating the account situation.

It is important to establish the ground rules with the client before accepting fee-based payments. If an account is in credit after an agreed period of time, it needs to be clearly stated whether this money will be carried forward. Similarly, with debits the client needs to know if he will be billed.

The IFAs at the Aifa conference expressed reservations about accepting fees as they said initial estimates are often less than the final bill and implementing the service can be time-consuming. But it is important that IFAs set up a plan of action.

The public is moving in a fee-paying direction and IFAs need to have the option as part of their armoury.


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