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Ian McKenna: Networks need to justify their value post-RDR

Ian McKenna MM blog 2013

There has been a lot of speculation about the future of the network model in the post-RDR world.

Many network firms have been talking about focusing on quality rather than quantity when it comes to members. One organisation that has been putting this into practice is Personal Touch, which is currently streamlining its business.

The Birmingham based business, known predominantly for its role in the mortgage industry, has spent a considerable amount of time analysing exactly who its member firms are and their typical clients.

The company has identified that its members’ typical clients are not the “high net worth” community that so many organisations seem to have built their business plans around attracting more of, but mass market customers with relatively straight forward financial needs around investment, pensions and house purchase.

As a result it has been building a proposition to suit firms which recognise that this is their audience. For many years the firm has delivered some impressive adviser technology via its Toolbox proposition and recently invited me to see how it has expanded this to meet the challenges of adviser charging.

Unlike other systems designed to address this need, many of which look to review the whole operating style of an adviser business and define a series of propositions which the adviser firm can then manage and deliver, the Toolbox adviser charging model is designed to provide a simple method for Personal Touch members to operate four key parts of the process.

Firstly adviser charging is setup for the business as a whole; this is then used to manage the charging process for individual transactions and on-going service leading to invoicing and subsequently payment reconciliation.

a users can configure a series of default charging models to allow for time-based, fixed fee, percentage of new money invested and funds under management as the basis for remuneration.

The adviser can then choose to bill the client directly or allow for payments coming from the investments arranged.

Personal Touch has created a list of defined service activities from which the adviser then selects what the service proposition elements would be for the individual proposition they want to design.

The adviser creates a client record and in doing so identifies the nature of the transaction, i.e. an advice event that takes place and establishes a policy record.

From these they can generate the fee agreement.

Doing this offers the adviser a range of service propositions/billing options. Personal Touch has carried out an exercise with each of its advisers and ascertained that their hourly rates, service proposition, and cost of doing business fall within guidelines that identify what it is reasonable to charge clients.

At this point the adviser identifies if VAT is to be charged on that service.

If on an individual case an adviser chooses a lower charging structure than their standard proposition, the system overwrites the record and reduces the percentage shown in the system.

Advisers have the ability to add any free text that the user wishes to appear on the invoice. If it is a provider payment, i.e. a perfect matching deduction, this would be recorded by PTFS with the Toolbox. All payments to advisers are made weekly on Friday mornings.

Separate processes define the transactional and holistic service workflows.

In the holistic workflow the adviser can associate all the contracts from which deductions might be taken relative to the ongoing service. As part of this process the adviser can choose to include or exclude individual contracts.

Ongoing services can be charged weekly, monthly, quarterly, half yearly or annually. The adviser can set up for how long they wish to repeatedly generate invoices; the system can allow for billing up to 2096.

Where the adviser is issuing a bill at this point they need to confirm that they are ready to issue an invoice. The adviser can choose to issue all invoices on one day per month, on an ad hoc basis, or on a client by client basis.

The system can operate at a client level, adviser level or firm level. This is also the case when creating the fee agreement level. It will also support mortgage advisers, meeting their MMR obligations.

The process for investment fees will also support mortgages.

Personal Touch has been training advisers on this process on paper during the past year, however, this is now all delivered electronically using Toolbox.

Having selected the fee agreements the adviser wants to generate they click an update button which will generate the invoices.

From the invoices menu the user can search all paid, unpaid or cancelled invoices. Invoices can be branded to reflect the adviser style using an invoice design menu.

Invoices can be searched by a range of criteria and exported via CSV to third-party accounting system. This applies to fee agreements, invoices and receipts.

Invoices are created as PDF files which can be printed or emailed. If emailed, company policy is that they should be encrypted, but Personal Touch is not mandating a system to do this. When payments are received the system will produce a list of all outstanding invoices for the client and the adviser can allocate and reconcile the payment received.

For cases where pre-existing renewal commission is being received, whether plans have been allocated to the workflow to the ongoing service, invoicing amounts received can be allocated as part payments towards regular invoices.

Overall this appears a very practical solution to an essential business issue.

In a post-RDR world delivering technology of this type to help advisers run their businesses has moved from a “nice to have” to an essential part of any network proposition.

The simple but powerful functionality this module delivers demonstrates that Personal Touch is well placed to meet the challenge of how a network can deliver real value to its members now and in the future.

Ian McKenna is director of the Finance & Technology Research Centre


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