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Encounter with grim reaper of life office cash

On the very day that last week&#39s Money Marketing was going to press,

including my recommendation that it is in the IFA community&#39s best

interests to form links with the major technology service providers, I

found myself in successive situations which served to reinforce that


During a single day, I was both impressed by the quality and extent of

co-operation going on across the industry to deliver technology to support

IFAs and horrified at the naivety and lack of research of another potential


The former situation occurred while I was leading a workshop at Origo to

demonstrate the electronic new business services that are being developed

for the industry. During this workshop, I was able to demonstrate the

software that The Exchange has developed for this process and discussed the

Misys solution.

I understand from Misys that it expects to be able to launch its quotation

and new business system on May 19. In addition, both AssureWeb and Synaptic

Systems are committed to providing such services within the current target

date for delivery of the end of July.

Norwich Union and Legal & General made versions of their electronic forms

available for use during The Exchange demonstration and I understand that a

number other life offices are also in the last stages of developing their

electronic forms.

At this stage, it would appear reasonable for the more

e-commerce-oriented among the IFA community to start pressing their key

business partners to confirm when they will have their electronic forms


The general reaction from those IFAs present was that the services

outlined could be seen to offer benefits both for advisers and life offices

compared with conventional paper-based systems.

With 12 life offices now participating in the implementation phase of this

project, any life office in the bond market that does not have a specific

delivery date for its elec- tronic forms capability will inevitably lose

its competitive edge by the end of this year, no doubt with a consequent

loss of market share.

It was with a mood of optimism after such a positive reaction from the

assembled IFAs that I called my office to collect messages. Among these was

one from a “journalist” who I had never heard of writing about the effect

of e-commerce on the IFA market.

After a few minutes talking to the “journalist”, it transpired that he was

working for a web design company and the output was not for publication but

clearly part of some early business plan that was being assembled.

Suddenly, the grim reality dawned on me that this was yet another

organisation which knows nothing about our industry, thinking that life and

pension offices&#39 coffers are overflowing with cash that they will be all

too willing to send in its direction based upon promises of an electronic


Most product providers are being deluged by such proposals and one of the

most common complaints I am hearing from life office e-commerce directors

is that they are simply not going to have the resources to support all the

different proposals being put forward.

There is a very real risk that too many service providers will dilute the

overall benefits to the industry and undermine the ability of the market to

achieve critical mass. I believe this is exactly the situation that has for

many years undermined the quality of back-office software available to


Too many small companies with inadequate financial resources and

development budgets have meant that IFAs have received lamentable quality

for their software licence fees.

Against this background, it is not surprising that Origo recently received

support from its sponsors to seek to promote a set of common guidelines for

the so-called portals or service providers to adopt in order to bring about

more effective relationships with life offices.

Generally, I believe this is a positive step although it does create many

challenges that Origo will need to meet. First, any operating guidelines

must be achieved by consensus. To be fair to Origo, it has already made it

clear that there are certain areas that it cannot enter. These specifically

revolve around commercial terms and pricing.

Any attempt to deal with such matters centrally would be surrounded by the

risk of anti-competitive practices and Origo is wise to make it clear from

outset that these are no-go areas.

It is equally important to make it clear that the industry is well beyond

the stage where it is reasonable to expect life offices to fund the

development of new services.

Misys has committed around 50m to the development of its portals, The

Exchange is funding its develop- ments from capital reserves and DBS

recently raised 10m from shareholders to develop AssureWeb.

This does not mean that individual product providers should not invest in

such propositions but the investment decisions must be made in purely

commercial terms.

The guidelines, as recently circulated to the various service providers

and portals, seek to identify a framework that will have benefits for

consumers, product providers and advisers, not least by accelerating the

deployment of a wide variety of e-commerce tools.

There may still be situations where individual commercial partners elect

to operate outside the guidelines for valid commercial reasons.

One of the biggest challenges facing Origo in fulfilling this new role

will be creating an environment where companies not traditionally involved

in financial services will be prepared to accept their role in defining

standards and other operational practices. In the US, non-financial

services providers are taking a greater role in the provision of financial

information and advice.

AOL, Quicken and CNN are just three examples of massive consumer brands

moving in this direction. It can only be a matter of time before similar

media organisations in the UK start demonstrating such aspirations due to

the intangible nature of financial services products.

Achieving an environment that can support everyone will require

considerable skill and diplomacy and, in being prepared to take on this

role, Origo is offering to fulfil a further valuable role for its sponsors.

If the industry co-oper- ates – and in this I include the service

providers – there will be an excellent opportunity to benefit from such

arrangements. But it will be necessary for service providers, life offices

and Origo to exhibit flexibility and understanding of each other&#39s

commercial realities.

Ian McKenna is a consultant and director of The Financial Technology

Centre. He can be contacted by email at: Tel: 0207-359


Fax: 0207-359 2858


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