The vast majority of IFAs are willing and keen to start submitting new business application forms electronically.
At last year's excom, our series of regional roadshow conferences, we conducted a survey of over 200 IFAs to build up a picture of their use, or potential use, of technology. This survey, just before the launch of the first new business service, told us that 53 per cent of the IFAs expected to make significant use of such services, with a further 23 per cent expecting to use them on an occasional basis. Only 4 per cent did not intend to use the service at all.
Since then, service providers have launched or are developing new business services and life offices are starting to support electronic submission of application forms directly via dedicated IFA extranet sites.
Using the Origo common internet trading standards,the industry is steadily developing systems that enable IFAs to submit new business forms electronically. And so it should. The benefits to IFAs are clear. By using common applications and business processes, costs can be reduced, time saved and client service improved.
A lot of time and money has been invested to get to this stage of agreed industry standards and commercial launch and the propensity of IFAs to use the service is still high. Last November, 62 per cent of IFAs questioned at excom expected to use a new business service to process investment bonds electronically.
However, there are still issues to overcome before these systems are widely used by IFAs, as opposed to being seen as useful in principle. Discussions with IFAs and product providers identified five key issues that need addressing in order to encourage IFAs to use the service.
In November, 31 per cent of IFAs said they would only use a new business service for investment bonds if the product providers offered incentives to do so. When asked specifically if enhanced electronic-only products would affect their use of these services, 87 per cent said it would increase.
So exclusive e-products with improved terms are a key driver of the widespread adoption of new business services.
As with comparative quotation services, the more product providers that support new business services the more encouraged IFAs are going to be to use them. If IFAs can compare products from, say, 15 key investment bond providers, but then only transact with one or two, the take-up of the service is going to be limited.
If IFAs have to evolve their business processes to incorporate electronic transmission they are going to want to do so across the board rather than having a different business process for different products.
Currently, although the actual application form can be submitted electronically, the cheque and declaration still need to be posted to the provider. A true paperless process may be more appealing to an IFA and there are now few barriers to prevent this happening.
Unless new business services are integrated with IFAs'back-office systems, all the details will have to be entered twice – once into the new business service and again into the back office admin system.
In order to understand these issues better and identify other barriers to widespread adoption of new business services, we hosted a discussion forum for product providers supporting our new business service and IFAs who are active in the bond market. The session focused on four key areas.
Changing work methods
The forum accepted that for new business services to become widely adopted, IFAs are going to have to modify their work processes slightly. IFAs felt that this will be a big hurdle because of a reluctance to adopt technology and change old practices.
So how do we overcome this hurdle? The introduction of e-products will encourage IFAs but another key element identified was training and support. IFAs and their support staff need to have access to training seminars and support material that will help them introduce new business services into their processes with minimum disruption.
E-products are certainly seen as a key element by everyone involved but the forum identified a chicken and egg situation. IFAs need incentives to change business practices but providers need greater use of new business services before they can offer enhanced terms.
Again, it was agreed that alternative incentives such as training and support could be viable alternatives. And that enhanced terms may not just come in the form of additional benefits for those trading electronically but maybe as higher charges or lower commission for paper transactions.
Volume and critical mass
The key to the long-term success of new business services is the need to generate enough usage to produce the cost and time savings that are undoubtedly available. This is particularly important as eventually the cost savings from e-commerce are likely to be used to offset the reduced profit margins of the 1 per cent world.
Providers, portals and IFAs have invested substantial time and money in bringing electronic new business services to the market. The key now is to make sure IFAs know what is available to them, what the benefits are, and the role they will play as the basis for full end-to-end electronic trading in the future.
Exchange FS and the product providers on our new business service have agreed to work together to create training material and assist with the training of broker consultants and IFAs. We are also talking with product providers which want to develop unique e-products to determine how it might support their deployment and usage. Finally, we have instigated a forum of service providers to look at, among other issues, the potential for shared marketing.
Of course, all the factors are interlinked. What perhaps we need to do it work on this chain of events in reverse order. If portals and providers can communicate the benefits this will lead to higher volumes of business, hence greater development of e-products, and the widespread adoption of new business services.