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Five steps to success

Predicting what will happen with CP121 is not straightforward but anticipating events is advisable.

For many financial advisers, one of the most daunting prospects is the migration from a commission to a fee-based charging system and the potentially complex challenges of implementing this change while wanting to ensure continued quality of client service.

CP121, in addition to being a regulatory overhaul, will undoubtedly be a catalyst for change, particularly in the way that technology is exploited to ensure businesses remain profitable. This has formed the basis for our own new software developments.

Even if nothing dramatic happens, then at the very least, organisations will have prepared and in the process taken a hard look at the way that their business is run.

From our own research and customer feedback, we believe there are five critical points in the light of CP121 and its aftermath:

•It is the client that matters.

•Industry-standard technology is here.

•Technology must be flexible for all circumstances.

•There must be access to client data through e-commerce.

•Use of technology must improve.

It is the client that matters

It is very easy to forget that while the regulatory framework might change, the client does not.

In fact, all the economic and demographic evidence indicates that the need for financial advice across the social spectrum is ever increasing.

The savings gap is increasing and that presents the Government with a major problem and, as the Oliver Wyman report points out, the fewer the number of financial advisers, the greater the gap in savings.

The issue for all financial advisers is how to price their services to accommodate the broad range of consumers needing advice and this has to be a combination of commission and fees.

I will come back to this point later but every business needs to look at ways of handling a larger number of clients as well as offering a tiered range of services.

It is imperative that every organisation offering financial advice, regardless of size, invests in a client management system.

At its most basic, this is a database of client contact details but, used properly, this system could run the sales, marketing and business management. It allows users to increase the capacity for managing a larger number of clients.

We also have to remember that clients are becoming better informed and they are more demanding.

They will look increasingly for advisers who can respond to their thirst for information, so again technology plays a vital role, whether it is pushing information to clients electronically or giving them access to data via a website.

Industry-standard technology

No one should be rekeying data and a client management system should integrate with other systems that fulfil the many functions of an adviser practice.

Microsoft Office is a global standard and its power is unrivalled. Simply keeping standard documents that can be merged instantly with client data is a potentially massive time-saver. The efficiencies continue with fact-find pre- population and archiving. An industry-standard client management system, with links to best-of-breed products, should move information between packages, such as product research.

This is moving towards a straight-through or end-to-end process that is the ultimate grail. This is relevant both for new business processing and ongoing valuations.

Equally important, data should be moved electronically around the business, not only removing the need to re-enter information but also keeping a chronological audit trail of what has been said or done for a client. This is vital both for efficient client service and compliance monitoring.

Technology must be flexible for all circumstances

We cannot predict with absolute certainty what the FSA will impose but every business should set itself up to offer clients the choice between commission and fees.

Baxter Fensham is an IFA practice that has moved across to fees and director John Baxter believes fee-based advisers are frustrated because they deliver huge amounts of value in providing advice but can deliver no value in the implementation because of the inefficiencies of product providers.

Commission-based advisers, he says, need technology to make their business models work – at present, they rely on massive cross-subsidisation. This will not be possible if commission is reduced or their clients find out what poor value they receive.

Baxter says that in embarking on the transition from commission to fees, they had to re-engineer their business completely. The foundation for this process was software which enabled them to record time, co-ordinate and track invoices and manage clients&#39 portfolios.

Access to data through e-commerce is essential

Microsoft&#39s new vision is access to data, anywhere, any time and on any device.

This is particularly relevant to financial services where data is critical to deliver a high level of service to clients.

A key role of an adviser is to aggregate data for clients, yet this, to date, has been a manual process as the client requests a valuation and the adviser must call around all the product providers to obtain the latest unit holding.

This is time-consuming and costly, so the ability to download data electronically is essential for the future. An industry-standard client management system should do this, so ensure you receive data from all the places you need to access regularly – including major life offices and fund supermarkets.

Use of technology must improve

Having technology is not enough, it must be used efficiently to gain the massive benefits that will enable profitable trading in the future.

There are many organisations, which do not have adequate systems in place and there are many with systems that are not being exploited. A lack of training is one reason but, more significantly, it is a lack of business discipline that is often the cause.

After CP121, it will be even more important to run the business efficiently and profitability (or lack of it) must be measured.

Get the technology in place to keep your options open and to add value, not only to the business, but also to the clients.


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