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Face up to virtual realities

When I first saw the front-page report in last week&#39s Money Marketing that

Misys is to set up a virtual IFA business, I confess the phrase “I told you

so” did spring to mind.

Only a few weeks ago, Misys was telling me it would only be offering

simple products via its consumer personal finance portal. At the time, I

questioned whether pensions might fall into the simple category in a

post-stakeholder environment.

It would now appear my comments were far from wide of the mark. But in

saying this, I am still drawn back to the conclusion that any organisation

delivering e-commerce services to the IFA market will sooner or later find

it irresistibly attractive to create more consumer-orientated offerings in

some way or other.

Such actions pose a major threat to two sections of the IFA community –

those who deliver no added value to their clients and act simply as the

gatekeeper to information or products and those who are adamant that they

will not adapt to a changing world.

In practice, this means very few IFAs should feel threatened by virtual

IFAs or whatever other description you want to give them.

Certainly, the pure execution-only market will become increasingly

cut-throat as e-commerce and, increasingly, m-commerce provide an ideal

platform for such transactions. But the truth that is the typical consumer

is far from ready to carry out complex financial transactions from end to

end online.

On the other hand, there is more and more evidence to show that once

consumers have been using the internet for over five years, they become

increasingly prepared to conduct financial transactions this way. This is

not to say such transactions would be to the exclusion of professional


Here, I believe, is the middle ground which should mean that e-commerce

can enable the IFA community to assist far more consumers and at far lower


The financial services industry is being swept along by a tidal wave of

pressure for lower-cost financial products. Consumers, the media and, most

important, the Government are determined to enforce such changes in the

marketplace. Only by making best use of technology can any business hope to

remain profitable in such an environment. However, the comfort value of

personal advice should not be understated and, if an adviser can harness

the benefits of e-commerce while maintaining that personal relationship,

the future is indeed rosy.

The conventional advice process is cumbersome and time-consuming. As

advisers are quite rightly required to be ever more professional, the time

necessary to follow the process as currently set outby the regulatory

regime becomes more and more expensive to maintain.

Ultimately, if the cost of financial advice becomes so high that only the

richest can afford such advice, this really is not the best way to protect

the consumer.

It would appear that, at least in some Government circles, this point is

being recognised. The recent report from the DTI foresight group examining

the potential needs of a financial services consumer in 2010 recognised

that one of the main barriers to delivering an environment where low-cost

assistance is widely available may be the current regulatory structure. It

identified that it may be necessary to make significant changes to the

current approach to financial regulation.

Hopefully, as its own future is now more certain, the FSA will begin to

examine such issues.

While changes in the regulatory approach could, I believe, deliver major

benefits to the public without in any way reducing their protection or

conflicting with the FSA&#39s guiding principles, this does not mean anything

cannot be done in the meantime.

I am increasingly seeing IFAs reinventing their business practices to take

advantage of ways in which they can deliver information and services to

their customers more effectively. As every week goes by, more and more

tools are being developed to make these services affordable for IFA firms.

Equally, the types of tools advisers will need to compete in this brave

new world cost many millions of pounds to develop. These are costs that

either have to be passed on to the IFA in full or subsidised in some other

way. If, in so doing, they are deployed by other distribution mechanisms,

does this really matter?

Advisers should be actively seeking content for their own web presences.

These should include fund supermarket facilities such as those I looked at

last week, mortgage-sourcing tools, comparison tools and calculators for a

range of products, policy-servicing feeds for existing clients and possibly

even full product research databases to allow both existing and new clients

to research some of their options at their own convenience.

I firmly believe this will cause more people to want hands-on guidance and

professional advice. The combination of the efficiencies offered by

e-commerce and the personal touch of qualified professional advice should

make a compelling combination for the vast majority of consumers.

Last year, it was suggested to me that as many as one in four people who

visit an IFA have no intention of using their services but are simply

engaged on a fact-finding mission, intending ultimately to transact the

business direct with a product provider or via a discount broker. If the

emergence of new types of advisers keeps these timewasters out of IFAs&#39

offices, allowing them to spend more time with those clients who do value

their services, this must obviously be a good thing.

In the last 15 years, the IFA community has shown itself to be highly

capable of adapting in the face of change. Only those who want to keep

their head in the sand should see this as less than a golden opportunity.


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