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Ready EDI

Over the years, an EDI message statement service has never been widely promoted by providers. Looking at this from an IFA&#39s perspective, it is perhaps easy to see why this has been kept quiet for so long.

The quality of data from most providers is, at best, inconsistent and, at worst, consistently poor. I wonder how many management teams are aware of this shortfall and of the impact on their IFA partners who are relying on the data as a core part of the business case for investment in technology?

It was originally seen as a quick win for the industry by a group of providers, Origo, The Exchange and a number of big IFAs, led by Hogg Robinson, which did drive significant benefit from the processing of electronic commission messages within their own back-office system.

Unfortunately, at that time, most IFAs could not take advantage of the messages because of a lack of suitable back-office software packages or the resource and commitment to modify in-house systems. Even so, at this point, a big tick was put in the commission EDI box and industry initiatives moved into other areas.

Our position today is vastly different. IFA firms have consolidated, creating bigger organisations and therefore a need to achieve cost savings by automating labour-intensive processes, such as the reconciliation of commission.

The market now includes a number of quality software packages which will handle commission processing for small, medium and large businesses. Support services organisations and networks also have a requirement both to reconcile commission and to split it on behalf of the membership.

It is this demand that has brought the electronic commission messaging back into the spotlight. After many years as a low-volume service, it is becoming the lifeblood for many IFA organisations now planning to take advantage of information technology developments. The benefits to IFA firms are wide-ranging:

•Rapid reconciliation of received amounts against expected amounts and identification of discrepancies.

•Automation – by removing the need to key commission statement transactions into a system.

•Faster processing of commission and therefore faster payment to advisers.

•Greater control of the process.

•Higher accuracy of information.

This list is not exhaustive and more and more IFA firms are planning to take advantage of this type of functionality. Indeed, commission messaging is the top priority of the Adviser Forum which has brought together a big group of like-minded IFAs to help better articulate key priorities to the provider community.

This group is playing an important role for the industry and its activities have already identified many of the issues associated with the use of commission messages. Given the scale of the benefits of getting commission messaging right, it is frustrating for those companies which are trying to use provider messages to find that, in many instances, the sum total of an electronic statement does not match with the equivalent sum total of the paper statement.

This is just one of many instances where data quality and procedural difficulties are undermining the huge potential gain from this capability. It is time to get back to basics and for providers to complete the work started so many years ago.

We tend to hear a lot about the end-to-end value chain these days and the importance of automating it but, more often than not, the value chain from a provider perspective is seen as the quotation process leading to the submission of a proposal form. From an IFA perspective, the value chain is much more. It starts with the compliance process – dealing with the client in a compliant way – gathering compliant information, giving appropriate advice, before selecting a product and submitting a proposal.

The final part of the value chain is receiving and reconciling the commission, which ultimately enables the adviser firm to continue the cycle and to continue to service the client but, so often, the commission processing is omitted from definitions of the value chain, perhaps because most of the benefits accrue to the IFA. Full automation will not be complete without this service.

We have to build our house on a strong foundation – comprehensive commission messaging can be a core part of that foundation. The choice is simple, if we do nothing we delay the take-up of technology by adviser firms and continue to promote misgivings and a lack of confidence in technology.

Alternatively, we can embrace change by putting the basics right. This could have a powerful impact across the market and could demonstrate how technology can be used to spectacular effect by reducing costs in adviser businesses. It would help to build more of an appetite among the adviser community for the more ambitious e-commerce initiatives which are essential if the industry is to reduce its costs.

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