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Meet the legal challenge

One of the major challenges facing organisations trying to build a financial advice brand is how to achieve a consistent quality of advice and documentation across many hundreds of registered individuals.

This can be a problem particularly in a network situation where there are underlying corporate members each with their own procedures and practices.

Last week, I looked at a software package which has been created specifically to address this challenge and to do so in a way that is entirely consistent with the FSA conduct of business sourcebook.

The software has been developed by Marlborough Stirling for Solicitors for Independent Financial Advice, a franchise operation dedicated to the provision of independent financial advice via legal practices.

Sifa currently has around 500 registered individuals but this figure is expected to double in the next year as the organisation&#39s activities extend to include a sister operation to provide the same facilities for accountancy practices.

Advisers either operate under the individual professional practice name or franchise brands Solicitors Financial Centres and Professional Financial Centres.

In defining this system, Sifa&#39s objective was to ensure a consistent and compliant method of delivering client recommendations regardless of a client wanting to invest a small Isa contribution or a substantial portfolio.

According to Sifa deputy managing director Les Sharpe, what most people fail to appreciate is that the FSA rule-book is not about compliance by ticks and checkboxes but focuses on the processes that the adviser follows and the information they supply to the client.

Sharpe says: “This is a departure from the previous Fimbra/PIA approach.”

At the heart of the system is a report assembly tool to generate, in a consistent format, a single report encompassing everything you would need to present to a client in connection with the advice process. If investment advice is given, this would include a copy of the adviser&#39s terms of business, an overview of the advice area, the process that the adviser will use and a copy of the fact-find.

In addition, the report provides a playback of the client&#39s identified needs, a summary of the way the portfolio has been constructed and a suitability summary, including both the generic product and the investment spread and type.

There are also a series of suitability comparisons identifying other products that have been considered but identified as less suitable than the recommendation being made to the client. Having identified what has been dismissed, the report then offers specific recommendations, with a summary of each recommendation and justification for selection.

The adviser still selects products themselves and can use other tools for this process but the software gives the adviser and any controlling network/franchise the ability to ensure a consistent and compliant approach.

During the portfolio construction process, all investments are detailed, profiled and a risk rating attached at fund or product level which is used to create an average risk rating for the whole client portfolio. This can be compared with the client&#39s stated attitude to risk.

A spreadsheet summary is provided of the current investments and position of the portfolio after the recommended products have been added along with a revised risk profile to allow for these.

All this is supplemented by fund/product factsheets which are delivered via Fincenta databank, a website that sources such documents from providers.

Throughout the advice process, a series of reminders appear based around the FSA conduct of business sourcebook to deliver a compliant output. The service also allows the FSA to carry out remote monitoring.

The software operates using an application service provider model, that is, all the software and data are held on remote, secure servers with no need for software to be held on the hard disk of the local PC.

This means that the service can be operated on any system with a simple Microsoft internet explorer browser and a remote desktop connection. Setting up the software to run on my computer was completely painless and took literally a couple of minutes.

ASP software developers argue that the overall cost of owning and maintaining their software is far lower than services operating traditional desktop PC models where the software has to be loaded and maintained locally.

Before the widespread availability of broadband services, the need for a high-speed connection to the servers on which the software is held might have been a challenge, today, this is no longer really the case.

Despite the fact that the software is operated over the internet, the speed is impressive. Using our standard broadband ADSL connection, it was not apparent that the software and data was not being held more locally.

Although the use of the software is currently mandated across the Sifa franchise brands, it can be licensed by other IFAs. This involves an initial licence fee and a monthly maintenance cost. These vary from £3,000 plus £150 a month for a single terminal to £21,000 plus £1,450 a month for a 25-terminal system. All prices are subject to VAT.

The cost also includes a full licence for The Exchange&#39s Office Web customer relationship management and back-office system and Micro-soft Office licences, including Word, Excel Outlook and PowerPoint to operate over the ASP service.

It could possibly be argued that using a system such as this for a small Isa contribution is like using a sledgehammer to crack a nut if the requirement is to deliver inf-ormation to clients in a totally consistent fashion and alleviate the risk of future regulatory or misselling problems this sledgehammer might well be worth using.

It must be recognised that the package is relatively expensive but it is not really a like for like product compared with many traditional back-office IFA admin systems as it includes not only the tools for compliant report generation but also the CRM and back-office software from The Exchange.

Having said this, I do believe it would benefit from a few more specific needs&#39 analysis tools, shortfall calculators and product research comparisons.

Overall, I found this to be an impressive tool to meet what I have always believed to be an important industry objective and contribute to the effective operation of an industry franchise. Any organisation looking to develop a national IFA brand should look seriously at this package.


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