Ian McKenna Technology
The RDR is not a subject that fosters unanimous views in our industry but one of the few things that most people will agree with is there will be fewer advisers while another is that the cost of traditional face-to-face advice to consumers will increase.
One of the main challenges facing adviser firms must be to decide if they will restrict their activities to the traditional advice process or look for different ways of maintaining relationships with clients who will no longer be able to afford the cost of face-to-face advice.
Many people see the burgeoning at-retirement market as the way forward and there is no doubt that a wall of money invested by baby boomers to provide for their retirement will be the subject of advice in the years ahead but what does this say for the future of the IFA community as a whole?
The need for at retirement advice can keep the current IFA community gainfully employed for the next 15 years or so but what happens after that? Do IFAs want to give up on helping young financial consumers? If they don’t, we need to learn some very different ways of working.
The way that most advisers conduct client relationships owes far more to the working methods of the 1980s than the 21st century. How can our industry adapt to the needs of tomorrow’s consumers?
It is important to recognise that the ways in which consumers research information have dramatically changed in the last two decades. The ways that people buy holidays, general insurance, music, books and utility services to name but a few industries have been transformed by internet-based services.
Today, almost every person carries with them a mobile internet browser on their phone. The only question is how many of them have realised this. They will increasingly be used as an integral part of everyday lives. Our industry cannot expect to be exempt from this.
Historically, financial products were generally considered too complex for consumers to compare on their own. Increasingly, modern consumers will not accept such an opaque situation. If an organisation’s proposition cannot be clearly articulated, the customer will increasingly seek a more consumer-friendly supplier.
The increased cost of traditional advice, combined with an increasing demand from consumers for clarity, makes online delivery platforms an ideal way to achieve lower customer service costs. It is a reality of modern life that over the next few years an ever increasing amount of information on financial products will be freely available via an increasing range of websites to help consumers choose financial products. The only question is how many of these services will be run by IFAs?
If the IFA community as we know it is not to become extinct over the next 15 years, there is an urgent need to embrace new working practices.
Against this background, I was particularly disappointed by some of the adviser reaction to the recent announcement from Mortgage Brain. The company will shortly launch a business-to-consumer component, which mortgage advisers could embed within their websites, in order to provide functionality to compete with services like moneysupermarket.com.
Despite this component only being available to authorised firms and Mortgage Brain confirming they have no intention of launching the service direct to consumers themselves, many advisers have criticised these developments.
One of the more absurd suggestions I saw was that MBL should launch the service showing a full range of mortgage products but removing the names of all the lenders. Are some mortgage brokers really so insecure about the value they add that they feel the emergence of an online service allowing consumers to compare and contrast mortgage products obviates the need for their services?
Over the next few years, there will inevitably be a plethora of online mortgage comparison services and any mortgage adviser who cannot add value above the information on such services is likely to go hungry.
The challenge must be for advisers to identify how they can build on the information delivered via online services and help provide consumers with additional insight. What Mortgage Brain is doing is providing the adviser community with tools that will enable them to compete with an ever increasing number of direct to consumer propositions. I believe they should be praised in doing this.
How many adviser firms have the hundreds of thousands, if not millions of pounds to spend themselves on building such a service? Through Mortgage Brain, advisers can now plug this functionality into their websites for tens to hundreds of pounds per month. Exact prices are to be confirmed and will depend on number of advisers in a firm.
Nor will the investment market be exempt from these changes. In practice, they are already taking place. Hargreaves Lansdown has already built a tremendous consumer-facing platform business, operated primarily on a self-service basis with the option for advice once the client has an appropriate level of assets. Not all advisers will choose to follow the HL model it gives a clear indication of what can be achieved with consumers blending technology with advice.
I have long advocated that one of the most important decisions an adviser takes when selecting their wrap or platform partners is the quality of the customer-facing service and this is equally true when considering a client management system.
Offering low-cost delivery options to consumers must be an essential component for any advice firm that does not want to become extinct in the next decade. Any adviser firm failing to examine how they will deliver such services is putting their future in peril.