It is Saturday morning when a parcel arrives from the US posted three days earlier. It is an electrical item that is significantly cheaper than I could have purchased here in the UK.
I check my email. Automatic alerts set on my investment portfolio advise me of shares reaching profit or loss limits I set when I made the purchases via an online dealer.
A search program trawls for antique porcelain items across a number of unconnected auction sites worldwide (OK, I know it is not everyone's cup of tea but it is one of my passions).
Finally, I click on my messenger service to see if any of my contacts are online. I have a quick chat with a friend in Montana who wants my advice on a couple of items he is thinking of purchasing. It is midnight and he will shortly be off to bed after placing a couple of electronic bids.
Why do I mention this? Well, until three years ago, I did not even have a home computer. The advent of the internet in my home has given me the ability to purchase goods quickly and more cheaply. It has opened my eyes to the staggering price differences which exist between the UK and overseas in many product areas. It has given me the information to indulge my hobbies and buy or sell across international markets.
It means I can buy almost anything from anywhere and make informed choices about offerings as diverse as Nasdaq stock and flintlock pistols, Zip disks and Chablis, pork pies and Isas.
It is precisely because the web offers so much information that it presents both a massive opportunity and, at the same time, a potential challenge to traditional methods of conducting business. Any business which provides the distillation of large quantities of information as part of its service can utilise the web to make this process cheaper and more efficient.
Rubbish, I am told. Pensions are sold and not bought. Clients prefer to deal face to face. People like a personal service, etc,etc. We are all familiar with these statements. But let me ask you these questions.
l Will group pensions in the new world provide sufficient margin to sustain an intensive face-to-face advice process?
l Can that process be expedited if information can be made available directly to the client via email or the web?
l If the task of providing information – brochures, proposal forms, quotations, fund performance, product comparisons – can be significantly speeded, does this leave more time for the advice process?
l There is no question that people need advice. The issue is enabling that advice to be provided in a way which enables the adviser to generate a profitable income in an environment where the charges which can be levied on a product have become legislated (in the case of stakeholder) or restricted by the inevitable comparison with stakeholder (in the case of group personal pensions.) How can this be achieved?
l What can providers do to assist in enabling IFAs and their clients to capture the benefits of ecommerce in order to meet these challenges as quickly as possible?
Axa recently commissioned research across a broad spectrum of employers. A total of 540 interviews were carried out with owners, managing directors, financial directors and other senior managers of companies employing five or more staff and with an annual turnover in excess of £50,000. This is representative of 599,000 companies in the UK covering all regions and business sectors. Interviews were conducted by phone by Continental Research during October 2000.
The most relevant finding in relation to the above issues was that over 10 per cent of all companies said they would carry out day-to-day administration of stakeholder-compliant pension schemes over the internet. But around 70 per cent of all companies, regardless of size, say they would not.
Research like this is fantastic. Up stands the anti-web lobby and shouts of “Told you so” fly back and forth across the room. But does this really come as any surprise?
If I were to ask you, in your position as an employer, if you would like to use the internet to run and administer your pension scheme, then I am pretty sure I would elicit a negative response. Why should an employer want to get involved in activities that are not key to his or her business?
If I asked: “Would you like your employees to have access to their pension details via the internet at work?”, then the research indicates the answer again will generally be no. As an employer, the last thing I want is to have my staff spending their time surfing instead of working.
However, if I were to ask you, as an employer, if you would like to avoid all the problems associated with paper-based transactions by clicking on a few buttons each month and downloading data to our mainframe directly from your payroll, you may be interested. If I then explain that this will minimise errors, provide a full record of premiums paid at both member and scheme level and mean that a pension scheme can be run far more efficiently than before, thus saving you time and money, I am sure you will be interested.
As an IFA, this process removes a significant administrative burden and frees up time for advising.
In addition, if employees access policy information via company extranet sites, this will actually save the employer time. There will be no queries to the payroll or human resources department, instant access to the source of the data when needed and less time required for the IFA to pass information from provider to client.
The web is fantastic for distributing information and it is for this reason that it will provide the time savings that need to be generated in a low-margin environment. But the need for personal involvement is clear, both at the advice stage and in ongoing support.
To answer requests for information from IFAs, employers or employees in an effective manner, product providers need to use all modern communications media. Although email is in widespread use, our current experience is that the vast majority of clients deal via the phone as their preferred choice. Thus, the ability to obtain information via the web is important but confirmation of queries are still sought from real people with experience and knowledge.
The ability to support this communication process means an IFA can spend most of his or her time on their core advisory activity. IFAs can save time by establishing electronic links between their clients and providers for the provision of information and be assured that the whole process is underpinned by immediate access to a dedicated and experienced team with the ability to deal with over 80 per cent of typical queries at point of call.
Personally, I make quite a few purchases of antiques online. Nonetheless, I still prefer the atmosphere of a real live auction and the ability to discuss a potential purchase with an expert.