These are interesting times for IFAs everywhere.
The conclusion of the consultation period for CP121 is less than a month away. It is likely that, within a year, many IFAs will have migrated to RI status within distributor firms.
In the last three months, we have read a lot in Money Marketing about what this could mean for IFAs but what about providers?
I believe that the impending change in structure creates real opportunities for providers to push ahead with their internet-based strat-egies which will create real business advantages in the brave new depolarised world.
To date, there has been little pressure on IFAs to start using the internet or portals to process new business applications. Only investment bond applications have been deployed and processed in significant numbers, with many IFAs preferring to stick to the paper-based approach.
In the world of CP121, distributor firms will sacrifice a level of independence as many of them will become owned by a consortium of providers as multi-tied operations in all but name.
This change in ownership, hastened by the removal of the better than best stipulation, means that canny providers will be able to demand that their chosen technology platform is the one adopted in their sphere of influence.
To achieve this control, some providers are taking stakes in existing portals, as we have seen with Scottish Widows, Friends Provident and Norwich Union's joint equity holding of Assuresoft and Skandia's takeover of Bankhall, owner of IFAengine.
More providers are likely to be investing in extranets to ensure they offer the ability to transact, process and service customer applications securely online. Providers will want to ensure their extranet services are capable of supporting the intermediary community well. Their intention will be to own as many customers as possible via the internet.
Assuming that distributor firms will form relationships with several providers, creating multi-tie relationships, individual provider Company X will want to get as much of a share of that distributor firm's business as possible.
Company X will do this not only by offering a best of breed product set but also by making its extranet as slick and efficient as possible.
Part of this slickness will include a seamless handing-off to other providers within the multitie relationship (and, in some cases, beyond it to niche product providers), where Company X's product range is clearly not the best for an individual customer.
If this connection is seamless, Company X could easily retain ownership of the customer as the primary host while white-labelling Company Y's products and paying them a share of the profit. This sounds like a great scenario for the provider but it presents technical, logistical and management hurdles.
The most critical challenge is to enable interoperability between providers. Existing portals may have a role here to provide the software “glue” as the information hub between providers.
Some providers still have a good deal of work to do to make their extranets fit to support the new electronic world. A study we commissioned in February among 12 leading life and pension providers found that only three offered online quotations and transactional capability across all their product range.
Half of the providers offered the ability to transact business online for all or most of their products. A further five let IFAs instead print off their application forms which could then be completed manually and posted.
Access and navigation around sites was also found to be cumbersome. There were basic problems such as the failure to provide a password within two weeks, the inability to allow saving of customer data midway through the application process (for later completion) or reuse of data already gathered at quotation stage all suggest a need to pay closer attention to what the user really needs when processing new business online.
But much of this work is no longer a huge challenge. Using the right toolkits, it is now possible to be ready to transact business electronically within 30 days, including time to design and build product application components for electronic applications and then deploy them on to an extranet.
For those that have previously deployed PACs in other channels such as IFA portals, redeployment to an extranet should take just a few weeks. These toolkits also provide the ability to store and reuse data effectively.
For those that do deploy electronic applications on their extranets, there are immediate cost benefits. For example, one major IFA company, Towry Law, has seen error rates on new business applications fall from 40 per cent to 9 per cent. It cuts admin overhead and time involved at both ends and ensures that new business comes on to the books much faster than was possible in the paper-based world.
Where will all this leave today's IFA or RI? The answer is probably in better shape. The adviser's role will continue to be one of penetrating what the customer really needs, sifting through the market to find the best products and then processing the application as quickly, efficiently and cheaply as possible.
The proliferation of standards-based technology and deployment of internet-based channels for processing and servicing applications will create more time for advisers to do what they do best – advise.
These are interesting times for IFAs everywhere.