Given the opportunity few adviser firms would not like the ability to in some ways emulate Hargreaves Lansdown. Whilst personal financial advice is clearly the cornerstone of most adviser businesses, RDR is going to make it increasingly difficult for firms to help investors with modest financial resources. Equally most advisers would welcome the ability to increase the revenue they can generate from direct offer business.
The 20 per cent of the adviser community which has adopted True Potential as their core support software will from this month have the technology to provide an online direct-offer Isa service to their clients.
This has been achieved through the use of a stream-lined direct-mailing pack, with the balance of the material needed to support the process being supplied online.
The service can be used by an adviser’s existing clients or new clients can go through a registration process to access the service. After providing some personal information, consumers follow a series of screens to identify how much they want to invest, their attitude to risk, investment objectives and how long they want to invest for.
Next, the user is invited to choose their investment strategy. Links can be provided to SEI’s investment strategies and income or accumulation strategies from Seven IM. Alternatively, the adviser firm can use the service to set up and offer their own investment solutions. As the adviser firm is the promoter of the direct offer, the investment options are entirely under their control. This can be a strategy created by the adviser or simply a range of funds for the consumer to choose from.
At this point, the system generates all the necessary documents which it recommends the consumer reads before carrying out the transaction. These include a summary of the questions and answers played back in the form of a document which reiterates all the information entered into the system by the consumer.
A second page provides an illustration of the projected investment returns using standard illustration (higher and lower) growth rates.
The third page summarises how much the client will invest, the level of fees and charges, together with a description of the investment strategy, with details of the asset allocation.
Page four reiterates the level of upfront and yearly fees and confirms that 2 per cent of the investment will be held to pay adviser charges and the 40 basis points charge for the True Potential platform.
This is followed by a disclaimer and reiterates how the investment objective has been set. The document then includes a key features document and personalised illustration, with full disclosure of all the charges together with a Morning Star fund factsheet.
After providing the summary above, the system then creates a pre-populated Isa application so the client can complete any missing data. The client also confirms that they have read and received each of the supporting documents generated as part of the process.
Payment can be made by debit card or bank transfer. Once the payment is made, the client gets an acknowledgement of the receipt of funds, together with a copy of the application, key facts and a further summary document. Having taken out an Isa online with Hargreaves Lansdown, it strikes me that the process is really not that different.
As soon as the client has set up the transaction, full details are pre-populated to the True Potential system for record- keeping purposes. The IFA is provided with a one-page summary, including the application summary, with client details, fund details, including the amount invested, fund and all other charges, the Isa declaration wording and confirmation that the client has ticked all the terms and conditions necessary for a direct offer transaction.
As currently constructed, the information is sent to the adviser first for approval. As the transaction is under €15,000, it is not necessary for the anti-money-laundering, identification and verification confirmation to formally be completed but the adviser still needs to satisfy themselves that the matter is legitimate for AML purposes. Funds are not invested until such time as the adviser confirms the contract. Provided the adviser is happy the transaction is suitable, they click proceed to validate and complete the deal.
I have seen services of this kind being made available to IFAs but normally it would be from a fund supermarket or wrap. This appears to be a further example of how True Potential has effectively evolved into a hybrid between an outstanding adviser soft-ware supplier and a highly functional platform. It is one of a small group of organisations that are effectively becoming third- generation platforms, bringing together the best of adviser client management and platform capabilities.
It would appear that the adviser software market is going through significant change, effectively splitting into two groups, one who will offer full transactional capa-city as part of their proposition and the other operating as administrative hubs but without directly offering the execution of transaction.
Different options will suit different firms and the implications of these changes are likely to be as significant for platforms as they are for soft-ware suppliers. It will be crucial for the earlier generation of platforms to understand how to adapt to what has all the hallmarks of a dramatic shift in power in the platform market.
Ian McKenna is director of the Finance & Technology Research Centre