When is an IFA not an IFA? No, this not a question about polarisation, more an examination of the sort of organisations which are increasingly looking to become financial services providers.
Perhaps the question should be more along the lines of Can you recognise the IFA of the future? As I have been saying for some months now,I believe that, notwithstanding any earlier demise as a result of depolarisation, the current breed of face-to-face orientated IFAs will lose their position as the dominant distribution channel for UK personal finance products somewhere around 2007/08.
My favourite, however, to assume the dominant role in distribution is, if you like, the homo superior of the IFA community. This is a new species of IFA who can leverage the benefits of new media and blend it with a mixture of conventional advice.
Such changes could happen more quickly but my view remains that inertia within conventional customer relationships will mean that we will not see the new type of advisers replace the old overnight. As every week passes,I am more convinced that such changes will take place over time as I see more and more e-commerce-orientated IFA organisations launching services which mix the best of the new and old economies.
Not surprisingly, the flavour of the month at the moment seems to be new e-IFAs aiming to capitalise on the stakeholder market. As an industry that is clearly suffering from a serious lack of new blood, the emergence of these new players should, I believe, be seen as most welcome.
A good example of such new players is Simple 2, the new company recently established as a subsidiary of the FTSE-quoted Scottish and Southern Electricity Group, the energy services group which services around five million residential customers and 200,000 corporate users.
If financial services products are about to become increasingly commoditised, who better than a utility to offer such services? Although initially launching with a stakeholder proposition, mortgages and personal loans are due to be added in April.
Defined-benefit and defined-contribution schemes, term insurance, an Isa, credit cards and insurance products are to be added later this year. You can see its first public offering at www.simple2stakeholder.co.uk. This is a service that enables employers to identify their responsibilities to comply with stakeholder legislation.
By completing half a dozen web pages, employers can enter the size of their workforce, extent (or otherwise) of their existing pension arrangements for employees, attitude to providing employee benefits and identify such other facilities as they may want to offer their employees.
The service will then automatically generate a report stating the steps the employer has to take to meet their obligations. At the same time, the service also creates a very valuable database of potential clients that Simple 2's IFA salesforce can then target as stakeholder customers.
The service has also been integrated with BT's Openworld portal at www.btinternet.com as part of the Money & Property category of the stakeholder pension section. With the increasing roll-out of the BT Openworld ADSL service delivering businesses high-speed internet access at fixed cost, this portal could become a valuable source of business.
Clearly, Simple 2 is setting up as a service to other IFAs who need technology to support stakeholder. It is offering to provide this technology to other IFAs with 10 registered individuals or more.
One of the biggest problems facing the financial services market is the lack of fresh talent coming into the industry. The fact that major FTSE companies with considerable experience of dealing with large numbers of consumers believe independent advice is an attractive market to enter suggests to me that there is indeed light at the end of the tunnel.
In addition to the new client-prospecting tool outlined above, Simple 2 is shortly to turn on its full employer and member-based services to enable its e-stakeholder service. I have only had the opportunity to walk through a series of screen prints rather than actually test this element of the service but it would appear to have much to offer. This includes the ability for employers to upload details of new members and payment information, download and upload details of contributions and pre-populate the system with passwords for members they want to encourage to join the scheme using the system.
Members will also be able to examine details on why they should join a company scheme, view the now infamous FSA decision trees and actually join a scheme.
The joining process is carried out over 11 screens. This involves the user checking through their own details, many of which will already have been pre-populated from the employer records. They are then given the option to contract out of Serps and taken through the various eligibility questions.
The service will pick up details of any contributions that an employer is making and any matching contributions that may be made.
The system will generate the key features and illustration and the member must check a box to confirm these have been read. The user then has to confirm they agree with the information supplied and confirm they want to proceed. At this point, they are given details of how they can come back and review activities they have carried out previously.
While much of the functionality provided here is available from various life office extranets, the fact that it can be provided by the IFA across multiple product providers using a common interface is a key differentiator.
Scottish Amicable is the first insurer due to go live with this service and I am told it will be followed shortly after by Scottish Equitable and Friends Provident, with other providers forming an orderly queue.
Given that the company only has 10 registered individuals of its own, it clearly has a role as a technology supplier to IFAs as well as attracting business direct.
It confirms that it is interested in licensing the technology to big IFA firms which have a similar requirement but do not want to incur the costs of building it from scratch.
This service is an excellent example of how an organisation with a non-financial services background is choosing the IFA channel as its preferred vehicle to enter the market as a financial distributor and make a valuable contribution both by bringing in fresh blood and delivering powerful technology which it is not confining to itself.