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Execution-only online services a huge opportunity for IFAs

I love change. I know a lot of people are change resistant but I am quite the opposite and one of the reasons that I race to work every day is you just never know what is going to change next.

The best type of change though, the one I like most, is the type that you create for yourself. Our view is that the world of the financial services intermediary is going to change quite dramatically in the short term (two to three years). If you think this is going to be one of those “RDR” articles don’t despair, it isn’t. The change that we envisage happening is down to another driver almost entirely. That driver is the internet and a seismic shift in the way that people are going to buy their financial product solutions in the future.

The role of the intermediary is going to change. It will change away from being the route by which people buy their products (Isas, pensions and investments) and  the role will become that of a facilitator. The future financial services intermediary will segment their offering into two distinct deliverables.

The first of those will be financial planning which will come of age in the immediate future and there will be recognition that this is where the real value lies. Many IFAs are already buying into the fact that financial planning precedes financial advice and there is a significant difference between the two. The difference being that financial planning deals with the “what if” aspects of a persons future by providing a track to run on and financial advice simply being the mechanism for delivery of solutions.

The second offering will be the combination of information, guidance and execution facilities which will seriously empower consumers to arrange their own financial advice solutions.

So it is financial advice that is most under threat from the change that is taking place. Particularly at risk is the “bundled” financial advice approach whereby the advice constitutes a relatively small part of the proposition and where the product sale dominates the adviser/client relationship. Whilst the abolition of commission under the RDR will be part of the reason for this change more important to this change will be the availability of sites that make it very easy for the consumer to do their own thing.

Of course there will be many who disagree with what I have to say. Consumers cannot do it for themselves, it is too complex and too time consuming and people generally don’t feel confident enough- that’s why they need an intermediary. Without the web I might agree but it would be a brave man or women who denied the power of the internet.

If you want evidence then it is there in abundance. It is perfectly possible for the typical consumer to sit in front of his or her pc and purchase just about any commodity they want. Book your hotel or holiday, no problem. Buy a DVD, Book or CD that’s as easy as Amazon. Arrange your car, home contents, buildings or even life assurance and frankly nothing could be easier. It must now be the minority who have not heard or tried online banking. These execution sites are frequently supported by massive amounts of information and guidance in abundance.

What have I not listed? Of course if some one wants to buy an Isa, a personal pension plan or a collective investment arrangement then there is already a good deal of choice available to them. At this stage advice is in the minority via the web but this is now beginning to change.

So here is a view of one intermediary model that will begin to change the face of the IFA community. It is a segmented offering where financial planning is provided either face to face or in combination with an online approach. The firm then offers a website where the consumer at low cost, with whole of market choice can execute the solutions that have been identified for them really online and totally transparent..

Is this really possible? Well my answer is a resounding “yes”. This is because we have already taken the most significant steps to achieve exactly this type of model. This week we launched our website It’s exactly what I have described above in that it offers information, guidance and to start with an execution only Sipp. Does it threaten the financial planning services that Informed Choice offers? No, not a bit in fact we think it will help to stimulate those people who really do need financial planning advice to contact us.

Does it cost a fortune to create such a facility? No, absolutely not but it does require a bit of creativity and drive and fortunately I have colleagues who have plenty of such attributes.

Deny the power of the internet if you wish. Cling on to the hope that people will always need advisers to implement product solutions for them but I see a different future and a very prosperous one for those who embrace such change.

Informed Choice chief executive Nick Bamford


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There are 27 comments at the moment, we would love to hear your opinion too.

  1. Cue the doubters, but for my money you are spot on Nick.

    The scary or exciting bit (depending on your outlook), is that this will happen much, much faster than most people imagine.

    “Our sort of client isn’t interested in the Internet” is a common cry amongst the doubters – and is based on nothing more than gut feeling and no evidence at all.

    But every hour of every day, consumers of all ages are looking for financial information on the Internet, and at the moment very few IFAs are providing on their websites what consumers are looking for.

    The time really has come for the industry to get to grips with this.

    Thanks for a great article Nick.

    Philip Calvert

  2. I have previously worked for firms that indeed segment their offerings in this way.

    I have been saying this on blogs elsewhere for sometime. Its not just books (and we had one of Martin’s books on our aStore), you can even buy and customise a Range Rover online as well!

    However, a couple of things to watch out for though. Margins for online X-O business are pretty thin; its easy for clients to shop around and frankly helps if you’ve got a scale of operation. Try rivalling Bestinvest or Hargreaves if you’re 3 men in shed in Sydenham (I’ve tried this – it’s difficult!).

    There is also an issue in being able to “sell advice” if you’re trying to offer it remotely alongside X-O. Again, I’ve done the “great value advice from Chartered Financial Planners” thingy – but the clients who are *currently* internet savvy do not jump at the idea of paying a fee for remote advice.

    But otherwise Nick, you’re right. Though a lot of IFAs will say “the internet’s not for my client”, I suspect you only have to look at what is happening to the traditional High Street to spot what is happening…it’s no different from what killed the High Street insurance broker.

  3. here we go full circle. we may as well promote DIY conveyancing or even go further DIY heart surgery – come to the internet and find out how far down the breast bone to cut to replace a heart valve. The internet is a great source of information, just like a library used to offer. But to encourage people into execution only transactions is lunancy beyond belief!

  4. Fortunately I am not a lunatic ( a bit odd at times but still quite sane!!) but more fortunately I don’t deny the power of the internet. There are very, very many people out there perfectly capable, with information and guidance, of doing it for themselves.

    But Anonymous should re-read the article I am actually suggesting that the execution takes place after advice has been delivered.

    Implementation is low value material (which is why the internet works) advice is high value. How silly to suggest that it even compares with life threatening illness requiring surgery

  5. @Anonymous

    What is actually happening on the Internet, is that consumers actually WANT to DIY. Many will inevitably make a hash of it, but we cannot stop them trying. Far better is to HELP them do it correctly – and to charge them for the privilege.

    If, as an industry we do not or cannot get our heads round the idea that the Internet is enriching the lives of consumers of all ages, and is replacing many traditional face-to-face services, then the financial advice industry is dead in the water.

    We have absolutely no choice but to adapt our service proposition accordingly. That does not mean that face-to-face advice is dead – far from it. It is just one distribution route – but it better be good. Very good…

    Philip Calvert

  6. I again dissagree with both Philip and Nick. What you are suggesting is not only dangerous but belittles all the hard work that professionals like you both have done to increase the status of both the profession and those working within it. Why after all these years of continuing CPD and exams would you want to give adivce to somebody and then have a vehicle for that indivudual to take that advice and on an execution only basis buy the solution online. I have seen the results of this kind if solution in the offshore market where clients are virtually transacting execution only business through non regualted advisors, It is sheer lunancy and the mess it creates brings back memories of bad selling practises of the 80’s. By all means use the internet and I actively encourage all clients to reesearch solutions, but to then transact the busienss execution only style, to presumably reduce the amount of your paper work or liabilty on the PI insurance, is demeening to both the profession, the people who work within the profession and more importantly is putting clients at risk becasue they will then have the false sense of security that their financial needs are fully catered. Face to face advice is absolutely vital to our busienss and whilst i recognise neither of you are suggesting for one minute that it should dissappear, but the idea of clients being able to take the advice and buy the solution via an execution only service is in my mind not a new distrubtion channel, but an irresponsable distribution channel.

  7. I can see the sense from both sides.

    On the one hand, there are already execution-only sites operating in this area and doing rather well.

    So should financial planners start to offer this service through their websites?

    What Nick has done is a good example of giving the consumer the choice to make that decision. However there are certain fundamentals that we, as a profession, must be mature about.

    Eg. George Kinder’s 3 questions are becoming flavour of the month: I have seen some financial planning websites asking these questions quite openly. This is nothing short of childish behaviour akin to a teenager who has just learnt a new technique about pulling, so he goes and describes it to the girls. The result – total loss of mystery, excitement and wonder, with the end result probably equivalent to confusion.

    People will always do what they feel is right, however I say that by giving information for free undervalues our profession and appears a tad desperate. It is quite apparent that these are being done to get a slice of the market share, which is fine, but mainly serves the interest of the firm rather than the client. Clients who have gone down the execution only route with regards to ISAs and protection do not come back for advice, until things have gone wrong.

    I do take Phil’s advice and will take action, but there will not be a full blown information service for free – just enough to create that air of mystery and excitement to seek our help.

    Now…anyone able to help me creating that??

  8. We’ve seen the internet change and evolve way beyond our expectations. Where it will be and what it will offer 5 years from now, I think will still surprise us!

    The future generations will consider transactions on the internet to be the norm. Whilst current generations may still prefer face to face transactional support, the internet is making everything easier.

    I think Nick and Phil are correct in their assumptions. If we are to maintain longevity in our business, we too must evolve and change how we are approached and how we will cater for the demands and need for our clients as a service provider.

    Assuming that transactional business will be DIY is a fair and safe assumption. People will want to do it themselves to try and save money (I try to do all my maintenance work myself, car, etc. using the internet often but find that when i’m out of my depth I will pay for expertise to either assist or more often takeover!) This will be true of financial planning. Many may find the options too confusing and wish to seek advice either as a one-off to ensure they are on the right track, or to takeover is alleviate the stress and worry of making the right decision. Our roles as financial planners will focus on service and advice. Transactional business will not have the same emphasis on our earnings as it perhaps has today.

    Separating advice and service from eventual transactions will be fundamental to our future business models. Those advisers with comfortable trails and renewals may be sitting easy just now but for those who have 30+ years left in this industry or those who wish to maintain the longevity of their firms out-with their own careers should be seriously addressing how they intend to evolve their businesses to survive in the future.

  9. At this stage I have no real opinion either way on this debate although I suspect that Nick is on to something with his arguement.

    I was interested to read the following blog by Graham Jones on the IFA Life website which tends to support the counter arguement:

  10. Please can I invite Anonymous to read the article again and understand what is being said. The phrase”Execution-only” appears in the title but that is not what I have said and the article clearly states that the execution (or implementation if you prefer) is driven by advice, So it is clearly not “execution-only”.

    That said how can I be so self centred as to believe that many, many consumers are not perfectly capable of doing all of this for themselves?

    I accept that some will get it wrong as per the example quoted by Anonymous but advice driven delivery is in itself not a perfect solution as we all well know.

    Facilitating the buying of a product solution on line, at low cost is of no threat whatsoever to the competent adviser. All the really good research tells us that clients value most the advice and planning delivery and place little value on the completion of the product execution.

    And yet the setting up of the financial product is where the most cost (commission) seems to be incurred.

    We need to recognise that unbundling advice and planning from the product solution is going to empower the consumer in the future and again let me emphasise we dismiss the power of the internet at our peril

  11. Now Nick you have confused me. The bones of your disucssion is that you give the advice (and presumably recommnedation) and then the client goes off and sources the solution on the interent.

    1. client gets a product commission and fee free
    2. Presumably these products will be priced cheaper than IFA distributed products as there are no commission and fees to pay and no renewal fees either.
    3. IFA can walk away from loads of paperwork
    4. IFA can walk away from any issues surrounding the product that subsequently arise.
    5. Your income is based on the advice, recommendation and solution – just not the implematation.

    Personally i dont see how any compliance departement would permit this – you giving advice and recommendation and then issuing an invoice along the lines of thanks for allowing me to provide advice recommendations and solutions, now you are able to google a solution.

    Forgetting which way the internet will go, but if you honestly believe that points 4 and 5 are advantages, then you are certainly not the highly regarded industry figure i have believed you are. I can not see any other profession that has gained chartered status, suggesting for one minute that the implemtation of advice and recommedations should be given back to the patient or client. Your idea is just trying to shortcut the rigidity of regualtion that you have supported for so long in preaching how RDR will bring out the true professionals. You should take a walk into the offhsore market and see how the unregualted cowboys are transfering final salary pension schemes into QROPS and still taking 20% commission from bonds. Nick, financial advice does not need another route for clients to potentially go down a road, leading to no where.

  12. Nick – I’m willing to listen to what you are saying on this as I respect your opinion. The things that concerns me is the only evidence I have seen of seperating advice and implementation is in the mortgage market post Direct only deals. I have personally had heated debates with Lesley Titcombe (well I was heated as they were email, she might not have been) on the subject of WANTING to be able to advise a client on their mortgage options and to be able to reccomend they proceed with a direct deal (as a fee based practice we offset any proc fee or not which we might receive), but as we all know, information IS power and being able to get the correct info from a lender is nigh on impossible to complete a compliant KFI.
    IF and only if the FSA pick up on my argument that Independant adviser client arrangament is one of agent and either insists the “provider accepts our appointment as agent OR a power of attorney limited to information ONLY whether they like it or not, the evidence I have seen at present (from experience) is that in 8 out of 10 cases we end up having to proceed with the second best option for the client as either we can’t help with the mortgage process due to the provider hiding behind the DPA OR we do go ahead with a direct deal (I’ve sat in on client meetings with their tied building society and the lender has STILL cocked up) and the increase admin of not being in the loop properly actually costs us more than the client has saved! If we leave them to it after providing the advice and we see the client for a review 6months or a year later, we find they’ve NOT ended up with what was intended, have made a mistake on the application and/or have ended up with a bolt on from the provider which either they can’t benefit from or duplicates something they already had in place with us which was better.
    So yes the internet IS a great way to help clients do as much work as they can themselves (to keep their costs down and maintain IFA availability to middle England), but I need you to convince me (preferably with evidence) how advice with client implementation could work.
    Look forward to your reply.

  13. Martin O'Connell 30th October 2009 at 5:59 pm

    Message for AG.
    Yes, I can help. But in the spirit of your message I’ll leave it there – to create the air of mystery!

  14. just as a final point on this Nick, exactly what wording would you use on your terms of business to cover your firm for any issues that would surely arise once your client buys online becasue obviously, you would deny all liabilty if the product bought, following your advice turned out not to be exactly as required or does not provide all the benefits needed.

  15. Anonymous,

    From your comments I’m not sure that you are understanding Nick’s arguement.

    What he is talking about is unbundling a process and breaking it down into advice, implementation of that advice and ongoing servicing.

    He then charges for each part of the process meaning that if the client for reasons of cost decides to implement the advice given by purchasing investments direct, then they can do so.

    The end result is that the client is happy and Nick is happy because he has been paid for his advice, what is wrong with that?

    Also, where does Nick claim that he is not liable for the advice he has given? Of course he is still liable for the advice, the difference is that he has been remunerated for that advice rather than the traditional IFA model where he has to sell a product in order to get paid!

  16. By teh way I’m not the one posting anon, but I do see their point re advice where implementation occurs somewhere else as we have experience of these problems with mortgage offerrings only available direct where we will give advice (which makes us liable), but it is very difficult to ensure the client ends up with the products actually reccomended!
    If Nick means reccomendation, client implementation on-line, but with Nick having on-line access to check the client has implemented what was reccomended, then that is fine, but as we all know some providers will not give on0line access for direct deals (Group stakeholder is a prime example) and while the client COULD give us their on-line passwords so we could check, the terms & conditions preclude them giving us the password and I’m a bit of a stikcler for rules. It would only take the FSA to make a statement that the terms and conditions for on-line access for non intermediated business must still allow the client to let their adviser have the passowrds in order to act as their agent, otherwise the only option is for the client to complete a general power of attorney (limited to info only) which is the route I think we are going to have to go down as the FSA can’t think this things through properly half the time.

  17. James the other thing is I don’t know if Nick wrote the headline or MM of the article as one of the other problems is that true “Execution only” means that the client has not sort or receievd advice from any source they have approached someone and stated exactly what they want. The client has little or no recourse to the FOS in those circumstances. Most providers have a tick box for was advice received yes or no. If no is ticked that is execution advice and the FSA I informed of proportion of business written in this way by a provider.

  18. James, I understand exactly what Nick is trying to acheive – a process whereby a client can can obtain advice and recommnedations, get paid and then its up to the client to decide if and whether the recommendation goes to implentation and by what means (adviosr or Mr. Google). My view is that this is totally irresponsable becasue the client will then be faced with a myriad of options and choices that will certainly mean that further advise is needed. This discussion is not about making more use of the internet, but rather a way for an IFA to shortcut the system and handing over the responsabilty of implentation to cyberspace and a cost concious client. Its a bit like the airline who charges for the use of a wheelchair, or the same airline who charges £80 for airport check in. Sure its about choices but look at all the furore, complications and opaquness it causes. If a client wants advice and subsequently tells me he is going direct for the implementaion, which already happens, I automatically send a letter confirming that any solution the client implements based on advice given by my firm (fee paying or otherwise) would be at the clients own risk and we accept no liabilty for the research the client would surely have to do. We are advisors – yes the internet changes things, it opens up far more research opportunties for us – Nick, good luck with your venture, I would be very interested to see your terms of business describing your role as your clients advisor. As far as i am concnered, I always am adjusting my business model, but with RDR around the corner, Mr Google implemetation, I will leave for the likes of Mickey Mouse and his friends.

  19. As usual arguments on both sides, however, whilst obviously there is and there should always be personal advice, we need to evolve and respect the fact that some very profitable business can be conducted if warranted on an execution only basis. Thanks Nick for a good article.

  20. The Mystery Shopper for IFAs 3rd November 2009 at 5:04 pm

    Couldn’t be bothered to read the whole article but the headline was enough for me. Execution Only for IFAs? That’s puzzling, I thought IFAs were to give advice as that is the whole point! I can see Execeution Only business from time to time but not as a great opportunity. Has Nick been sucked in the regulatory brainwashing machine?

    Too many IFAs are losing sight of what we are. INTRODUCERS OF BUSINESS not INVESTMENT EXPERTS or SAUSAGE MAKING MACHINES. If you don’t get my point you’re too new at the game.

  21. Sorry for the delay in replying I have been out of the office. If any one didn’t understand what I was getting at that is my fault not theirs by the way, the responsibility for clear communication always lies with the communicator not the communicatee!!

    As ever the debate is good and we are going to have different views. The thrust of my argument is not about absolving me of any responsibility. By the way if a compliance department doesnt allow something that is generally in my experience a good reason for pursuing it!!

    My message is about empowerment and reducing costs. Those contributors who know what I stand for know how passionate I am about “unbundling” There really is no reason why advice has to be bundled up with financial product solution and remuneration (commission) through the product.Advice stands alone and it is worth paying for. Product solution can stand alone and can be done directly (as per the internet) or via an intermediary. Advice can include specific product solutions or not (consider Financial Planning for example).

    The reality is that the old model was very much a bundled approach. What I am doing is trying to present a picture of a different future. Trust me there are many many people out there who can successfully DIY and in many instances to a higher standard than many intermediaries and at lower cost.

    Let me repeat this is not about avoiding resposibility but is entirely about enabling the consumer and I see that as very client centric.

    The big mistake that any intermediary can make is to think that product solution is highly valued by the client. If you know him then the work done by Brett Davidson in this area sums it up. On a scale of 1-10 where 10 is most value clients value advice/strategy at 10. They value implementation at 4!!

    When you think about the current intermediary model the intermediary values implementation at 10 (this is where most cost is incurred) and often gives away strategy/advice only to be paid if the client buys a product! How daft is that?

    Honestly if you think about it we are going to enter a world where it is dead easy and cheap for the client to implement and they (if they are sensible) are going to do that based on advice but many will be able to do it without advice.

    Please continue to deny the power of the internet if you want to but I suggest that is a very dangerous strategy.

    If I have one grouse it is this. Please Anonymous don’t attack my values because you don’t know what I stand for but do by all means disagree with my opinions

  22. Nick, can you please finish this thread by explaining:
    1. How you would word your firms terms of busienss. “we are giving advice, we are giving recommendations but will take no responsabilty for how the client implements our advice or the product he buys on the internet”?????
    2. Has this been discussed with the FSA?
    3. Are your firm’s PI insurers comforatable with a fully regualted advice process up to a point of sale, but excluding the implmentation.

    Execution only means, no advice given client is on his own. Whilst i understand exactly what you are trying to do, what I fail to understand how you are covering the compliance and regualtory issue. You will be giving the client advice and recommnedations and I still beleive that it is totally unacceptable and irresponsable for a business model to actively encourage self implentation of financial planning – no other profession uses the internet in this manner – unless of course you are going to base yourself offshore, but then that will open up a whole different can of worms…………….I shall wait for your reply Nick.

  23. Nick, this is becoming an extremnely interesting thread and the pity is that the two previous emails should have been published in reverse order.

    I go back to my intial email, we are professionals, our clients rely on our knowledge of advice, research, recommendations and implemetation. You have not convinced me at all that unbundling the process will benefit the client and i would go further that I would question your values becasue I honestly believe you are devaluing what you as an industry stalwart have been pusing for so many years, esepcially in coonnection with RDR and level 4. Show me one other profession, especailly who have been honoured with chartered status, who unbundle in their proffesional services on the basis that clients have the ability to source and implement cheaper implementations on the internet. Lets start with an architecht, He draws the plans, recommends a structure, then under your model the client goes off to the internet and implements the solution – come on Nick, live in the real world, what are the chances of the implmentation working and the structure being solid enough to remain standing. Moving on, the airline pilot, teach him to fly, then he he chooses a new aircraft, downloads an instruction manual to fly a jet from the internet, i doubt he would be able to turn the engine on. Going further afield, and this is a very delicate subject but the terrorist. he goes on training camps and then seeks information on the internet as to how to blow buildings up.

    The internet is an extremly powerful source of information but i view it as being extremely dangerous for any professional to actively use a busienss model where the client is encouraged to implement a solution on his own courtesy of Mr Google. My comments about your values are totally justified becasue you are putting the client at risk, becasue once your insturction to act finishes and the client then goes to Mr Google for implementation, what happens when implentation is not covered by PI insurance. Finally Nick, we all may bash the FSA for the manner in which our work load has increased, but for a man with such a high profile within the profession to quote “if a compliance department doesnt allow something that is generally in my experience a good reason for pursuing it” is something that you deserve to be severely censured on. That is not an attack on your values, but a comment on your opinions.

    Nick rethink your model becasue from what i see and read, it is a soft option to provide advice and recommendations, but negate the need to deal with the hard part and ensure the implemation is indeed the correct one.

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