An excellent example of this is the time I spent two weeks ago working with Cap Gemini Ernst & Young's management consultancy division on its document examining the challenges and opportunities facing the IFA market.
In preparing this document, the CGEY team consulted IFAs, technology portals and product providers and included its own input from the detailed strategy work it is involved in across the industry.
I believe the output (which can be found at http://www. capgemini.co.uk/finance/market/insurance/press/index.htm) could be seen as a warning to the whole industry of the essential changes that must take place over the next few years.
This week, I would like to offer my own analysis of CGEY's compelling summary. As I see it, the work carries messages for each sector of the marketplace surveyed.
For the IFA community, it makes it clear that, while growing numbers of advisers are acknowledging the increasing role of the internet, particularly by recognising that this will be the way they will get information from their life office business partners, plans on how they will prov-ide similar facilities to their clients are scarce.
Although many advisers are creating poster-type websites, only a handful seem to have recognised this is really only scratching the surface and that their customers will want to access detailed financial information online.
You only have to look at the increase in the numbers banking online to realise that more and more consumers are finding the convenience of having information at their fingertips 24 hours a day highly attractive. It is not without reason that banks such as Barclays are increasingly turning their advertising focus to attracting new online customers.
With banks showing more and more signs of turning their attention back to financial advice, IFAs need to recognise that piggy-backing a financial advisory service on the back of an existing online banking arrangement is an ideal way to drive into traditional IFA client relationships.
Not that all the news for IFAs is bad. One clear conclusion is that there will continue to be a strong demand for face- to-face advice. A projection from Prospektus points out that 57 per cent of consumers still see this as their primary source of advice.
There is, however, the suggestion that the differentiator which decides who people go to for face-to-face advice will increasingly be the extent of their other client support offerings such as making policy information available online.
In many ways, this is as much a challenge for product providers as it is for IFAs. In truth, the polarisation which so many in the market are keen to defend at all costs – requiring as it does clear separation of the relationships between advisers and product providers – cannot be easily adapted to an e-commerce environment.
Much of the communication infrastructure required to ensure that, in terms of information services, the IFA does not appear the poor relation of the financial supermarket is simply not in place.
Life offices may be encouraged by the fact that, in 2004, a substantial body of the IFA community expects to obtain information concern-ing existing contracts from their extranets.
I agree with CGEY's suggestion that it would be better for this information to come over portals. However, at this time, who among the portals is currently offering a work-ing policy valuation service for anything but a small range of insurers?
There are also strong warnings concerning the future role of the portals, particularly those which have the power to direct advisers, through the approved product panels of their associated networks to limit which product providers advisers will use.
If these relationships become too interlinked, there is a clear risk that providers could become marginalised. As a result, it is clearly in the interests of providers to support those portals which are not in a position to inhibit IFA product decisions.
At the same time, there is definite evidence from the IFA responses that any portal seeking to do this would be putting at risk their core value to the IFA.
Probably the biggest concern, and one that will be equally relevant to both IFAs and life offices, is that increased commission is creating the ideal environment for new low-cost alternatives to undermine the market dominance of the IFA. In just over 10 years since the abolition of the maximum commission agreement, payments have leapt from 100 per cent to up to 170 per cent of Lautro scales.
A 70 per cent increase in the amount that may have to be taken out of a client's contract to fund the cost of the IFA's services in such a relatively short time must be of some concern.
It may be that some of this increase has been necessary to meet the ever-increasing cost of regulation. But how many other industries can you think of where distributors have been able to expand their gross margin by 70 per cent in the last 10 years? Most industries are suffering the reverse effect.
In the US, a range of automated advice providers are now offering their services to customers for as little as $50 a year. There are clear indications that a number of org-anisations are working toward providing similar services in the UK.
With such a disparity in cost compared with traditional methods of advice, it is difficult to believe that at least some consumers would not be attracted. Not only would such services cost the consumer less compared with the real cost of conventional advice but, because of the reduction in the amount providers are required to pay to the IFA, it might even become attractive for them to offer differentially priced products to automated advice channels so that by not going to a conventional IFA a customer might actually be guaranteed a better product.
This is a chilling prospect but it could make sound financial sense for both provider and consumer.
To me, this summary suggests that the lights of e-commerce are burning as brightly as the future of financial services but the vast majority of IFAs are sitting in the dark. This is a clear call to action, as I have said for a long time, and it will be interesting to see how many rise to it.