IFAs see a future for fund supermarkets working alongside face-to-face advice but they feel most UK consumers are not ready to plunge into the world of online investment on their own.
Mellon Trust chief executive of fund administration Steve Blizzard recently des cribed the idea of a stand-alone supermarket as flawed, maintaining that face-to-face advice from IFAs will remain the prominent distribution channel. He says the role of the IFA remains critical in Britain and that e-only solutions are cannibalising the direct-sales channel, not add ressing the need for advice.
Blizzard also says IFA fund supermarkets act as support for financial advisers but will not lead to online advice. He says the distributors which will succeed are the bricks and clicks operations that offer both online and face-to face advice.
IFAs appear to agree as the gen eral feeling is that what is needed for a successful firm is precisely that combination.
Supermarkets are still a relatively new venture and IFAs say no one should expect it all to be plain sailing. But they also feel the popularity of supermarkets in the US must be taken into consideration as this could point the way to increasing success in the UK over time.
At present, however, one of the major blips to the smooth service is that not all fund management companies are operating online. The technology is moving forward – slowly – but if IFAs and consumers are unable to apply for funds online then it will inevitably affect the take-up of this service.
It could be a case of fund mangers trying to run before they can walk in their haste to offer this service. Hargreaves Lans down head of research Mark Dampier says IFAs are still having to print out application forms in the majority of cases. He believes the main problem for supermarkets is that the UK is not yet ready for this service.
Dampier says 12 months ago everyone thought all business would be operating online by now but it is apparent now that the internet is not going to take over everything. Firms need the technological cap ability for this initiative to succeed but delays and incon sistencies are putting off people.
He says: “Firms have been slow to take up this technology and it will have a detrimental effect on consumers. The industry has lost sight of the fact that people do not want to do everything online.”
IFAs also feel the impersonal nature of the internet holds back supermarkets. Consu mers seek advice from IFAs and establish a relationship. This service puts IFAs ahead of big financial institutions which constantly face staff changes and puts IFAs a long way ahead of online services where the consumer has no human interaction.
The ease with which consumers can access funds without advice is also seen as dangerous. Complicated products are increasingly available direct to consumers through supermarkets. This can push some investors towards advisers for clarity but there is a growing number of internet-savvy consumers who want to take responsibility for their finances.
Plan Invest joint managing director Michael Owen says some investors do their own research and buy online. But it is not as simple as just buying a product. Investors need advice on sectors, such as technology, which they are not given this advice when buying on the internet.
He says: “Investors are getting into problems. Some people are confident to trade online but they are quite capable of making mistakes and have to see an adviser later.”
Most investors are reluctant to deal online but one met hod of developing confidence is for an IFA to demonstrate the benefits of services such as online stockbroking to clients and prove it is making life easier for the client and
But IFAs also believe supermarkets can help to ease costly and time-consuming paperwork and admin. Rather than attracting new business, the feeling is that using these online platform for transactions will create greater efficiency.
The consolidation of fund groups on one site makes them easier to manage and regular operations such as switching is also made easier. The depth of fund information available on the individual sites can also save IFAs from having to chase around doing their own research.
Bates Investment head of res earch James Dalby believes there is a role for both face-to-face advice and fund supermarkets.
He says: “I do not think it is a case of face-to-face advice being better than supermarkets but what is right for some people is not right for others.
“It should be about offering both options which complement each other. It is not a battle between them. IFAs need to cut down on the time spent on admin and this is a great way of doing that.”
Rather than seeing supermarkets as competition, IFAs are taking the opportunity to improve business by taking advantage of the speed and flexibility that the supermarket sites can provide.