Electronic systems are changing the GPP market and will spread wider.
Tony Muir, Senior marketing communications executive,Clerical Medical
All IFAs should look at the way electronic commerce is having an impact on the group pension market and use this as an opportunity to re-examine the way they do business.
The “commoditisation” of group pensions that is under way will sooner or later be seen in other product areas. IFAs may have to limit the amount of time that they can spend with each client and cut many of the non-money-making activities they carry out. The IFA's job is to give advice. This is where they can add real value, not in doing routine admin tasks.
This is where e-commerce comes in. It will help IFAs to handle the large volumes of business necessary to make the new pension market a viable opportunity. It can ensure IFAs continue to deliver a first-class service andstill make a profit.
The aim of a good e-commerce system is to strip out all unnecessary manual processes and create an admin system that is as efficient and cost-effective as possible.
Product providers need to offer IFAs fully integrated back-office systems and e-commerce “front ends” which can give access to pre- and post sales information and admin services. If IFAs are to make a long-term commitment to the new pension market it is vital they choose providers with this degree of technological capability.
So what key online features will providers have to make available and what direct benefits will they bring? Let us consider what the electronic sales, servicing and admin processes for a group pension scheme might look like and how technology could be used at each stage to make significant savings in time and cost.
The first consideration for the IFA would be – can I afford to take on the business and at what level of service? Electronic tools can be used to calculate commission levels for various scheme designs. If client visits are proposed, various marketing aids, such as draft presentations and example illustrations could thenbe downloaded.
At scheme set-up stage, duplication of data could be minimised. In most cases, 40 to 60 per cent of the information needed to create scheme records could be taken directly from the employer's payroll and transferred to the provider in seconds. Removing the need to transfer information on paper would have a significant impact. Accuracy of data would improve as it would be transferred usinga single process. Delivery and availability of information would be near instant.
This information could then be used as the core data for all future processes including the production of pre-sale illustrations, pre-populated application forms, policy documents, client-specific key features and contribution collection files. Once a scheme is established, thesystem would be able to deliver servicing requests, such aspolicy valuations, fund swit-ches and transfer valuations, quickly and efficiently.
Electronic systems would also allow the employer to view information online at any time, including scheme reviews, instant notification of joiners, leavers or retirement options, benefit statements, increments and support material.
The IFA could control the degree of the employer's access in line with his business requirements. If the IFA is not able to devote a great deal of time to a specific scheme, the employer could be given a level of access which would allow routine scheme admin to be carried out by a personnel administrator.
A key component of any effective e-commerce system would be security.
Using existing models, this could be expected to break down into three distinct areas – identification, authentication and authorisation. The following is an example of how a security procedure might work.
When an IFA first registers with a provider they would be asked several security questions which would be used during subsequent log-ins to identify and authenticate the user.
Once established and verified, this information would be used in conjunction with existing IFA data, SIB numbers or commission account numbers to ensure an IFA is authorised to access information or transact business. Similar security processes could be put in place for employers requiring access to scheme details.
Looking further into the future, employees could also have direct access to group pension scheme information using a variety of methods including digital TV, Wap phones and ATMs. Each policyholder could be given a Pin number that would allow them to switch, redirect funds or change details as frequently as desired. IFAs would be kept informed of any changes by an event notification webcast facility that would also allow them to follow up any contact the employer or employee has had with the provider.
Such online services would save IFAs time, money and reams of paper as well as improving their service and increasing customer focus.
Instant access through the internet will ensure IFAs' time is used more efficiently and enable them to get quotes at any time. One-stop processing, with no queues, is vital if IFAs are to have full control over their working practices.
In this new era of pension scheme development, margins for providers and IFAs will come under increasing pressure. Technology will be a key factor that separates providers and IFAs who have the long-term capability and cost efficiency to deliver what is required and those that do not.