Skandia's decision to introduce a higher commission level for IFAs who choose to submit Isa business electronically to its Multi-Fund Shop is a positive and entirely appropriate step in the advancement of electronic trading.
It is widely known that the initiatives in the life and pension arena that are proving most successful are those that recognise the need to contribute towards the very real investment IFAs are having to make in technology or in providing something extra for the client.
It is important that product providers recognise these costs, which are not just incurred in providing the necessary hardware and software but also in supplying the training essential to turn e-trading expectations into reality. Such costs are coming at a time when the same advisers are having to prepare for substantial reductions in commission income as a result of the 1 per cent world.
Skandia has also made significant changes to the overall level of charges within its fund supermarket. As the purpose of this column is to focus on issues relevant to e-commerce, I believe it is appropriate that I look at the effect these changes have in relation to other fund supermarkets. There can be no doubt that Skandia is throwing down the gauntlet to the rest of the players in this important area, particularly those fund supermarkets that are not in a position to respond.
At the front of the list of laggards in terms of e-commerce capability delivered to the IFA community must be Cofunds. As every day goes by, I find it more and more difficult to consider it a serious player. Last week, when I spoke to its head of sales Rodney Aldridge, he was quick to identify that the company took 5 per cent of all new IFA-originated Isa business in March, all on paper.
How much of this was on the basis of promises of technology that, to date, is conspicuous in its absence?
In previous columns, I have recognised the considerable achievement of Cofunds chief executive Sam Jensen in launching a service without what most people would consider the essential ingredient of any fund supermarket – the economies achievable through the use of technology.
That such a significant proportion of IFA Isa business was attracted substantially against as yet undelivered promises is a testament to the fact that Jenson is not the only person within his organisation who can talk a good story.
Unfortunately, when you come to look at what has been delivered, the substance behind the story appears more than a little lacking. I am told that Cofunds has just begun piloting its online valuation service with IFAs – big deal. It is now a year since the launch of this service and all it has been able to deliver is a pilot to a limited number of IFAs.
The promise is that it will be able to turn this on to all IFAs later this month. I am not holding my breath. Aldridge says the next step will be for it to deliver a platform capable of operating buy, sell and switch transactions.
The theme of the Cofunds launch in January was very much: “We are not there yet but when we get there we are going to be better than anyone else.” (Readers may recall that, at the time of its first press launch, little things such as Inland Revenue and FSA authorisation had yet to materialise.) One of the highly attractive promises in January was the ability for advisers to switch existing client investments to the Co-Funds environment, the so called in-species transfer.
This, we were told at the launch, would be available from April this year when Cofunds launched its Pep and Isa transfer service. At the time, I remember directly challenging other fund supermarkets on why they too could not deliver such innovation. Sadly, a couple of months after the promised delivery date, the reality falls a little sort of the rhetoric.
Aldridge tells me it is not its fault as a number of big fund management groups cannot support in-species transfers. He now tells me: “We cannot do it on our own, the industry needs to come together to support this.” This may well be true but why was Cofunds boasting about its ability to provide such facilities at its launch?
What really worries me in the e-commerce context is what happens when Cofunds comes up against the very real challenges that are involved in delivering an all-embracing e-commerce platform?
To be fair, I could challenge Fidelity for the lack of e-trading incentives on Funds Network. But it is important to recognise it is the market leader in terms of helping IFAs establish an integrated business-to-business-to-consumer presence via the capability that exists for advisers to include Funds Network in their own web presence, either via a direct link or through the Exchange's web-builder service.
Choosing a fund supermarket as a partner will be one of the most important decisions any IFA takes over the next few years. The technology support that any supermarket can deliver must be one of the key differentiators.
I believe it is essential to focus on what exists rather than promises – which, after all, do not pay the mortgage.