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Mellon Trust chief slams &#39flawed&#39 supermarkets

The chief executive of fund administration giant Mellon Trust has slammed fund supermarkets, claiming they are fundamentally flawed and that face-to-face advice from IFAs will remain the prominent distribution channel.

Steve Blizzard says the role of the IFA remains critical in Britain and that e-only solutions are “cannibalising the direct-sales channel, not addressing the need for advice”.

Blizzard says IFA fund supermarkets such as Cofunds will act as a support for financial advisers but will not lead to online advice. He says the collapse of many dotcom stocks last year is testimony to the fact that online-only is not a sustainable retail environment.

Instead, the distributors which succeed will be the bricks and clicks, which offer both online and face-to-face customer service.

Blizzard&#39s comments contradict the recent wave of optimism in fund supermarket platforms within the investment industry, with Cerulli Associates predicting last year that a quarter of all new investment fund business will emerge through fund supermarkets by 2004.

But Blizzard says it will be two generations before there is a critical mass of the population comfortable with purchasing financial products exclusively online.

He says: “A short time ago, received wisdom was that the online-only sales channel was a winner for the future of distribution of financial services. Today, the e-only solution is seen to be an incomplete model for financial services sales. For providers, an online-only sales channel is a flawed model.”

Financial Technology Centre director Ian McKenna disagrees with Blizzard and predicts an imminent death for face-to-face advice. He says: “Face-to-face advice is expensive and unnecessarily so. You can deliver personalised advice without undermining the service while cutting out huge amounts of unnecessary costs.

“By 2007/8, I do not expect the current IFA face-to-face advice channel to be the dominant distribution channel in financial services.”

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