What will make more IFAs adopt e-commerce services? This is the issue I spend a large amount of my time considering and is addressed by two recent research reports with, I believe, varying degrees of success.
The first, to which Swiss Life has given me exclusive access for this column, looks at current IFA preferences in terms of obtaining illustrations and what IFAs believe are the barriers to moving to full electronic trading.
This is part of an ongoing programme of research that the company is undertaking to identify the willingness of IFAs to support e-trading.
At the same time e-marketing, a specialist web design consultancy, has published its report, Building Profitable Relationships with IFAs, which suggests ways product providers can use extranet sites to complement their existing relationships with advisers.
In the case of the latter, I get the impression it is targeted more at the fund management industry than life offices. Most offices have already delivered most of the services outlined in the e-marketing report. By comparison, with one or two notable exceptions such as Fidelity, fund managers are considerably behind most of the bigger life and pension providers.
A total of 765 IFA firms took part in Swiss Life's survey this spring – slightly over half bel-onging to a network.
Respondents covered a wide range of areas with investment, pensions and individual protection all being identified as specialities by over three-quarters of those participating.
It clearly demonstrates the importance of the IFA portals. No less than 69 per cent of those questioned indicated portals are now their preferred way of accessing quotations. The second most popular method of access was still the telephone, leaving life office extranets very much third.
Moving to full electronic trading, ease of use and lack of advisers' own technology skills come out as the constraints most popularly cited by advisers. This information was gathered on the basis of unprompted mentions, suggesting these are the issues advisers are really thinking about themselves.
I have mentioned before the benefit that could be gained by a co-ordinated technology training programme being put in place by providers. This research supports the case for such an approach.
The e-marketing report contains some interesting commentary even if it does indicate a lack of understanding of the real issues in running an IFA business. While valid comment is made on the importance of getting information on existing contracts available online, I would take issue over the suggestion that creating forms that can be completed online, printed and signed adds any value to an IFA.
Although this may benefit the product provider – in that they can receive a validated application with information populating directly onto their systems – in my experience, most IFAs can fill forms in far more quickly by hand than they can type.
In my experience, this is a classic example of the sort of thinking that would come out of a product provider. It may reduce the burden on the product provider but in practice delivers little, if any, benefit to the adviser. If an e-commerce initiative is not significantly improving the IFA experience, should it be developed at all as its use will be minimal?
This can be demonstrated by the lack of take-up of the original EMX service which clearly failed to recognise the needs of the IFA. To be fair to EMX, it has now recognised this. After recent meetings with the company, I expect to see a far more IFA-friendly service.
A further example of such failings is the valuation service being delivered via providers' extranets. These services can certainly reduce costs for providers.
The IFA pays for accessing the internet, learns to navigate the website and accesses the information they want. If this information is requested using more conventional means provider staff would have to field the enquiry in a branch or call centre, access the necessary information and deliver it by fax or post (or both).
Via either solution, the IFA gets the information in a form which has to be re-keyed into the back-office system to maintain their own records – unless they are happy to keep it just on paper.
On this basis, they may as well stick to phoning providers and leave the bulk of the burden with the life office.
What would really help advisers would be to populate information from providers systems straight through into the adviser's administration systems. It is this functionality that I am working with a number of the largest national IFA firms and a selection of life offices to achieve.
Once such facilities can be delivered across a full range of life offices – over both extranets and all the IFA portals – at long last I believe both advisers and providers will begin to reap significant cost savings from e-commerce.
Ideally these benefits could be achieved right across the investment industry. However, there is a significant barrier that needs to be overcome. Origo is developing the necessary XML messages to support such services for life offices, but at the same time EMX has developed separate standards for the fund management industry.
Last week, a major national IFA told me this was causing significant additional cost as they, or their technology providers, will have to support multiple standards. This must reduce the benefits achieved by both Origo's and EMX's sponsors.
There is a very real risk – with the choice between potential VHS and Betamax standards (I am not saying which will be the Betamax) – that advisers will decide to keep making costly phone calls rather than adopt the e-services that create such savings for providers.
The arrival of financial aggregation in the UK makes it increasingly important for financial service providers to be able to exchange in open formats without the risk of duplicating costs. One option is clearly to close down the existing Origo and EMX standards functions and replace them with an all embracing financial services technology body. Possibly the FSA or the Government's e-envoy might want to take a lead on this?
I would see this as a last resort. It ought to be possible for the life insurance and fund management industries to co-operate in this area, hopefully such an approach could also extend to the mortgage and ultimately banking arenas. The biggest risk is that each industry becomes so concerned to protect its existing investment that they lose sight of the bigger prize that can be achieved through co-operation.
In that case, everybody loses and we are likely to still see research projects on what is necessary to persuade IFAs to adopt e-commerce in five years time, by which time we should have reached a stage where all industry communications and transaction have become electronic.
Swiss Life's research will shortly be published in the next edition of its quarterly magazine Protection. E-marketing's report is available from www.e-marketing.com, price Â£450.