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Stand and deliver

IFAs begin planning their post-retail distribution review services, it is becoming clear that for any ongoing service-based proposition, advisers are going to need significantly more information about client investments and that such data must be delivered more regularly and efficiently than has historically been the case .

Discussions I am involved in are increasingly leading to the conclusion there is an urgent need to define and deploy new ways of delivering such information.

With most firms aiming to get their processes up and running at the beginning of 2012 rather than by yearend, the time for action is limited. And yet the risks of failure are enormous; to do nothing is not an option.

This will affect both traditional life companies and platforms, although the latter community is better placed to address the issues. Indeed, if the current malaise among several life offices is not addressed, platforms that can deliver the full range of adviser reporting needs are in a prime position to harvest an enormous RDR dividend, as vast swathes of existing life company business is moved away because the traditional cost of servicing is too great and cannot be passed on to clients.

If it is conducting a face-toface review for those clients who can still afford traditional advice, or operating a remote, light-touch aggregation service, access to a wide range of data will be essential.

This will not just cover valuations. There are coherent arguments for details of the asset allocation, or at the very least unambiguous ways of identifying such a breakdown from third parties, as well as detailed transaction history and a range of other items.

Most valuations from life companies involve real-time messaging. In the past year it has become increasingly clear that such services, which were never originally intended to be used in the volumes now likely, are limited and will put considerable pressure on insurers if they are to be scaled to meet post-RDR needs, especially supporting advisers’ client-facing online and mobile phone-based aggregation demands.

Business as usual will not meet the necessary standard in the brave new world and will result in lapses and transfers that will be cataclysmic for most life offices

In my view, a 100-fold increase in the level of realtime messaging required by advisers over the next few years is not unrealistic if IFAs are to see off the challenge of the infomediary and organisations like Google expanding into the financial services arena.

How many providers could cope with that level of increase?

While standards were developed for bulk messaging, deployment in the market has been limited. More data is needed than is currently supported within the standards – even then, large numbers of insurers do not actually support all the information in the current standard.

Many of the issues around the provision of data may appear trivial at first glance. However, the reality is that without the information IFAs need being delivered in the format they require, it becomes far more difficult for advisers to carry out essential tasks.

For example, the use by several insurers of their own proprietary fund identifiers, rather than established industry standard codes, may seem insignificant but it multiplies the amount of work some advisers need to do to clearly identify a client’s asset allocation on existing investments.

Many life offices lack understanding as to the extent to which the wrap and platform community have raised the bar when it comes to what advisers can expect to receive both in terms of frequency and detail.

At this time yet another proposal for an “industry factory” is doing the rounds. The idea is that insurers could save vast amounts of money by closing all their individual processing factories and outsource it to a single IT firm.

Even if it were desirable, I am not sure how viable a single factory is now, given a significant number of insurers have effectively done this by
outsourcing work to Capita.

Running large-scale delivery capacity for regular information internally will almost certainly put a huge strain on insurers’ resources. Just a handful of organisations have the capacity and experience to handle the necessary volumes of data as part of their normal business in other sectors.

I can see some argument for outsourcing the delivery of this sort or information, although ideally we would see a couple of competing solutions to ensure a competitive marketplace.

Cutting down the number of firms delivering data to advisers’ client management systems and consumer websites could considerably reduce the level of individual engineering necessary to link the different parties.

The more I talk to IFA firms it becomes clear we are facing a meltdown in provider administration and service as the RDR takes a grip. Old processes and business as usual will not meet the necessary standard in the brave new world. Unaddressed, this will result in lapses and transfers that will be cataclysmic for most life offices.

To avoid such catastrophe, it is important to find a better way now before it is too late, starting with a clean sheet of paper rather than going for
the soft option of trying to tweak existing systems which will almost certainly fail to deliver what is needed. Time to put new arrangements in
place it is running out and collaborative action is vital. I will be fascinated to see how many firms are prepared to take such steps. Those who do
will be the long-term winners.


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