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Driving forces

One of the key questions that the industry has to address today and in the future is what will drive IFA usage of ecommerce?

There is now a choice of portals to aggregate provider information and, for some products, a complete end-to-end process exists. The momentum is such that for the core volume products – term insurance, bonds, mortgage protection and pensions – such end-to-end processes will soon be available on all portals.

So what is the problem? It seems like a job well done. However, the next challenge is probably the hardest that the industry has ever had to face and that is to move to a critical mass of business being submitted using the electronic services.

But this is still not happening. Perhaps the root of the problem is that, at the moment, ecommerce is seen almost as a self-contained application in its own right.

In terms of the IFA&#39s systems environment, most of the current offerings are quite fragmented and disconnected and, therefore, ecommerce is just another complication to what must seem to many IFAs a very muddled picture.

In terms of technology, IFAs could perhaps be segmented into three areas:

•Bigger IFAs quite often have IT departments and have chosen to manage data either themselves or through a partner and are in the process of integrating the various systems components of their business, including the ecommerce element. This clearly has a relatively high cost.

•Smaller, perhaps regional businesses have developed very effective systems environments, quite often driven by the vision of a key person within the business.

•The third segment, and perhaps the biggest, consists of those IFAs who have made IT purchases over a number of years and consequently have a mixed bag of services available in the office, quite often on different pieces of computer hardware. It is this last group that is unsure of the future in terms of their systems environment and where ecommerce complicates the current picture.

This view of the third segment is supported by feedback from a large number of IFAs who have attended our ecommerce roadshows up and down the country over the last few years. Indeed, the question of how they should tackle their IT needs became so regular at events that the roadshow presentation was modified to include several slides on a high-level approach to installing systems to meet the needs of the business. This highlighted the uncertainty among quite a big proportion of the IFA community.

Given the diversity of the IFA market, it would be wrong to advocate a one-size-fits-all solution. It may be worth trying to draw a parallel with other services that IFAs procure.

It is a fact that systems and technology are not a core competency for IFAs in the way that giving financial advice is. The same could be said of car purchase and maintenance, where IFAs either buy a car and outsource the maintenance to a local dealer or go further and outsource the whole package for an agreed amount per month as part of a lease or contract hire agreement. Under these arrangements, all that is required is to put in petrol and drive the vehicle. All the worries are covered by the lease agreement.

IT could be treated in exactly the same way. It is not a core competency, therefore, there is an opportunity to outsource the whole service provision to a third party.

Another analogy I heard recently was that of the TV rentals, which were so popular in the last few decades. Any problems were rectified at latest next day as part of the monthly charge.

So what might the opportunity look like from a software provider&#39s point of view? Clearly, the offering must be a complete turn-key solution to IFAs&#39 systems, data and telecommunications needs. This probably starts with and includes hardware provision, which perhaps in the terms of the lease is future-proofed so replacement is not an issue.

Systems would be pre-installed on to the hardware and data migrated from existing systems. Initial training and support would be part of the package.

Data would be integrated with one or more portal environments and there would be seamless access to specific provider extranet services. The result would be a complete end-to-end process where, ecommerce is no longer a stand-alone complication but an integrated part of the IFA&#39s desktop environment.

Telecommunications perhaps deserves a special mention as many applications are wrongly criticised in the market because of low-spec modems and lines that these days should not be a limiting factor. The world is online and there are offerings which give high-speed access for fixed rates. This, too, could be part of the package.

Now, all this sounds too good to be true and I am sure the first question that most IFAs would ask is how much would all this cost? Well, you do not get something for nothing. IFAs must accept that if they are to receive value, there is a cost. However, this is far more palatable if it is in a controlled and defined package rather than in a piece-meal arrangement.

This principle was voiced by Ian McKenna in his regular column in Money Marketing when he said: “One thing I hope will be lost in the merger of Assureweb and M-Link is the concept of everything being free to IFAs. I believe it is undermining the extent of resources that can be allocated to IFA software.”

The ideal situation would be a fixed monthly sum over a period of perhaps two or three years, just like a car lease agreement. The outcomes of this development would be:

•Far less worry and frustration with technology.

•More time to focus on advice and sales.

•Increased use of ecommerce services.

•Automation (finally) of the supply chain to enable cost-reduction across the industry.

It also creates potential for more sophisticated use of data. Hopefully, there is an opportunity for software providers to earn reasonable income, particularly with the economies of scale linked to volume uptake.

So what needs to happen? The challenge is facing the software providers in the IFA market to be innovative in their thinking and to tap into what is potentially a huge market.

Perhaps the key thing that is required is a complete rethink of the business model in terms of charging for and supporting their products and services.


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