“Is increasing revenue the key business issue for IFAs rather than reducing costs?”
No doubt many readers will recognise this as one of the questions posed by the Sandler review. It is indeed an important question and how it is interpreted is even more important. But let's say any provider in the industry was to ask this question, how would it be interpreted by IFAs? Well, knowing IFAs as I do, there is a possibility that it is interpreted as the provider saying “focus more on reducing costs, then the provision of advice will be cheaper and more customers would have access to advice”.
What this misses is that by and large finding new customers is not the big problem for IFAs these days. Most IFAs have got more customers than they can handle and are busy focusing their efforts on those who will generate the greatest revenue. For larger firms, the constraint to growth is not finding new customers, it is finding good quality advisers to meet the needs of those customers.
But back to the question. Of course, the answer will vary from one IFA practice to another but let's face it, most of you come from a sales background – “selling your way out of trouble” may be a natural instinct for many.
Somehow, between us, we have to solve the problem of getting our costs down. We have to increase our productivity. We cannot “sell our way out of trouble” indefinitely.
How? Regulation is surely the key? If only the FSA would cut back on all the paperwork. Estimates vary but for some IFAs for every hour they spend in front of a client, they spend four hours doing the paperwork. If by some magic that four hours could be cut to three, then productivity inc-reases by 25 per cent. Imagine what that would do for your bottom line and for mine, if IFA production went up 25 per cent.
The bad new is there is not going to be any magic wand waving although our friends at the FSA are working hard at developing risk-based compliance regimes. The idea is that the degree of rigour and associated overhead should reflect the degree of risk to the customer more accurately than it does at present. We know too they plan to increase the extent to which they can monitor remotely, using technology.
Which brings me to the crux of this cost cutting issue – technology.
Never in the history of mankind has so much been promised to so many to so little effect. But it is beginning to make a difference. Last week, around 10 per cent of all the Prudence bond applications we received were submitted electronically. Straight onto our mainframe from your desktop. We are not alone. Right across the industry, technology is starting to make a difference. But somehow we have to get from 10 per cent electronically to 90 per cent electronically. Somehow we have to get to IFAs inputting the data just once to populate their client database and our mainframe.
Lots of IFAs agree with all this. They have agreed with it for years. They are fed up being preached at by people like me about the need to embrace technology. Their response is simple: Please give me something that works and I'll happily use it. Maybe there is one small thing we can do as an industry to help to make it work.
At the moment, IFAs are faced with a plethora of portals, umpteen intranets and dozens of extranets, each with its own security procedures, passwords and log-on protocols. How many times do IFAs have to exit one site and log on to another? Surely the industry can get its act together and design a single log-on process and enable IFAs to move seamlessly from one site to another carrying client data with them as they go?
Tony Kempster is distribution director for Prudential Intermediary Business