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Decision trees branch out

I usually hate the early morning alarm call on a dark, wet and windy Monday. A warm bed seems so much more enticing than thoughts of the long, unpredictable week ahead. Meetings, writing content for m-link, phone calls, lunches, email, more meetings- it must be time for a holiday. But, this week would be very different – my first royal premi£232;re.

Monday started off with the phone virtually glued to my ear. BT&#39s profits are definitely higher on the back of my direct line alone. Journ alists, suppliers and partner companies, new and old, wanted to hear more about our new brand, theformula, which launches next year as a personal financial guide.

After extensive brand dev elopment, it is a big relief that we can now talk about the name without having to use the codeword – Operation Hogwarts, named after the school of magic in the Harry Potter books. I now realise what agencies are paid for.

An evening at home, for once, involved a major decision. Do I watch the sad death of Victor Meldrew, or the historic Who Wants To Be A Millionaire? Would Chris Tarrant restrain himself when the first million was won? I have to admit I knew which k
ing was married to Eleanor of Aquitaine but wasn&#39t sure where Duffel coats were from. After all, how many famous Belgians do you know?

Judith Keppel won&#39t have any problems spending her new-found wealth – I am certain that several enterprising IFAs have got to her by now.

On Tuesday, I spend most of the day checking over content for the m-link website builder. With something like 80 per cent of IFAs now using the internet, many are beginning to build their own websites so they can commu nicate more easily with their clients. With more providers also adding their products to m-link, much of my day is spent writing press releases.

Wednesday is the highlight of the week – the glitzy royal premi£232;re of Charlie&#39s Angels, an aptly named event for me. It seemed a bit strange dressing up in black tie simply to sit in the back row of the Odeon to raise money for the Prince&#39s Trust.

I left the office with colleagues Wendy and Sarah, also dressed to dazzle Prince Charles and others. Drew Barrymore and Lucy Liu had competition.

We arrived and were ushered into the cinema. Would there be popcorn, asked someone from the Sunday Mirror? Where was Cameron Diaz, asked another from The Telegraph?

After waiting half an hour for Prince Charles to take his seat – apparently there was some mix-up over his ticket — the film began, preceded by a fanfare from Her Majesty&#39s finest trumpeters. This was no ordinary show.

The film was great but I am not sure what Prince Charles made of the soundtrack, especially a track by Prodigy with some rather unsavoury lyrics.

Afterwards, it was on to a Chinese restaurant for some crispy duck and a late night.

I am afraid that Thursday was a bit of a blur. I am convinced the Chinese restaurant did something to the Aust ralian Chardonnay – all very suspicious as they did not uncork any of the bottles at the table. I won&#39t be going there again.

It is an early start on Friday morning to do a television interview on ski insurance. Three-quarters of a million of us will leave the UK this year heading for the slopes. Unfor tunately, one in 10 will break a leg.

After more meetings during Friday, it is back to reality and time to write Corres pondent&#39s Week, a week with a difference for several Charlies.

Paul Charles is Editor-in-chief of m-link.

Aberdeen Asset Management&#39s Jonathan Polin was once again the star of Fidelity&#39s out-takes video at its Big e-asy conference last week.

The video, which inc luded interviews with journalists and fund managers from across the investment industry, was played in front of around 1,000 IFAs at Wembley Conference Centre last Tuesday.

This year, Polin managed no fewer than 10 appearances on the out-take video, most of which had to be bleeped out.

The highlight, how ever, was a slow-motion shot of Polin wiping his nose with his hand followed up by a quick smear on the table.

Runners-up for next edition of “It&#39ll be ***** on the night” were Elliot Bayley&#39s Rob Sandwith with seven appearances, and The Exchange&#39s Lorcan Murphy with six.

Another tale of Before They Were Not Famous – The Diary has discovered the secret past of St James&#39 Place Capital chief executive Mike Wil son. As a handsome young man in 1966 after England had won the World Cup, Mike was working for Equity & Law. Unable to sustain himself on his meagre wage, Mike began a spot of moonlighting as a male model.

He was spotted by the Milk Mark-eting Board and fronted a poster campaign to enc ourage young men to drink more milk. Making the most of the country&#39s football fervour, Mike started popping up at London Und erground stations in a Bobby Moore pose in a football strip.

But the big offers of the catwalk never rolled in and it proved to be a rather short-lived modelling career. He just had to make sure that he earned eno ugh money in financial services.

Over the last few months barely a week has gone by without one or other of the banking operations ann-ouncing they are launching a new service to target the “mass affluent”.

Although definitions of the income and liquid assets that confer such status vary, for mass affluent you could just as easily substitute “typical IFA client”.

In the main these new services are not branch-based. They are aiming to operate far more on a “what you want, when you want it and where you want it” basis, with technology forming a large part of the proposition.

Generally these services will include a core banking service and then layer other services on top such as investment advice.

What we are, in fact, seeing is the banking community making a substantial re-entry into the IFA market and looking to use technology to leverage the advantage of regular contact that is an inherent part of the clearing bank relationship.

In developing “new economy” relationships creating high frequency contacts is seen as essential to build up customer loyalty. In internet speak this is frequently referred to as “stickiness”.

The aim is to create a service that users will want to use regularly – online banking is an ideal way of building such relationships. Customers will want to log on regularly to check their balances. When they do, they are by definition thinking about their money. What better time to be gathering financial information from them and possibly offering them advice?

I believe that these emerging players may in fact be giving a good indication of how the IFA of the future may have to operate.

Financial advice has been a highly labour intensive service to deliver, especially if it involves sending advisers out to see customers in their home or workplace.

One bancassurer calculated a few years ago that it was costing them £700 every time they sent a salesman to an evening appointment with a client.

But face-to-face advice does not have to mean that people are physically in the same location.

If you base advisers in a call centre and give them a video link over the internet or digital television, far more clients can be serviced in a cost-effective way.

This will not appeal to everybody, but if it makes it possible to reduce the cost of advice drastically through lower product charges this may appeal to a significant section of the community.

Financial supermarket-type operations are ideal for this purpose.

Such a supermarket could offer a range of product wrappers – say for shortor med ium-term (Isa, single-premium bonds and maximum investment plans) and long-term (pensions) savings.

Back this up with specialist technology to examine asset allocation and customer risk profile. Then bolt on on-line current and deposit acc ounts. You are already a long way towards an environment that could provide a one-stop solution.

Some providers are currently not that far away. Look at the Skandia product range, its U-select software and the client servicing facilities on its extranet.

While not questioning for one moment Skandia&#39s commitment to independent adv ice, clearly it has many of the components that new type IFAs might need in the future.

Such services will clearly need to operate on lower char ging models than now but that is simply a matter of price. Some providers are not as far from a structure that could accommodate a 1 per cent world for all products as the industry might think.

Remuneration for these new advisers would be more likely to be based on low-level charges on funds under admi nistration or even fixed fees – possibly as low as £150 a year.

Banks are by no means the only organisations who might offer a new breed of IFA-type services. The recent ann ouncement that BSkyB is to set up an interactive service targeted at advisers would also give it the necessary tools should it ever want to go a stage further and enter the consumer-facing side of the market.

If it is possible to remove the excessive costs of operating in a market where client and adviser physically meet and move to a mixture of self-service guidance backed up by call centres staffed exclusively with qualified advisers, it should be possible to provide consumers with assistance for a fraction of today&#39s costs.

Such operations might in fact attract fresh blood into the industry. There is clearly a drastic shortage of qualified advisers in the market. From the limited numbers of new advisers coming into financial services, it would appear few young people see commission-based selling as attractive.

On the other hand, the type of call centres necessary to support remote advice could well prove attractive to a whole new breed of IFA.

With the Government having just thrown a wild card into the game with the chan ges to polarisation, at least for Cat-priced products, clearly it is hard to form a definite view on the future of the IFA channel. But in many ways I am not sure if this matters.

For some time now I have held the view that IFAs as we know them will probably cease to be the dominant distribution channel in financial services around 2007/08.

Changes in polarisation may affect this date but currently I believe the dominant role of the IFA is most likely to be replaced by none other than a new breed of IFA, operating as a fund supermarket. They will provide clients with on-line services over the internet, digital television and whatever other new technology will by then have become commonplace.

The sheer cost of these tools will mean that only a handful of current industry placers are likely to be able to afford these tools on their own. IFA net works and other support organisations will see their focus increasingly concentrate on delivering technology.

Even with these changes I believe that we will see a smaller number of much larger IFA businesses.

If they can harness technology to allow them to offer a far wider range of services using economies of scale and substantially red uce the level of product charges needed to support their commission, there is no reason why new-look IFAs cannot continue to take centre stage in the financial advice process.

This all assumes they will be prepared to adapt, but adapting is something IFAs have shown themselves to be very good at in the past.


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