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Take extra step to win B2C battle

It is not that long ago that e-commerce-related articles appeared with relative infrequency in the trade press or any press for that matter. In fact, we called it electronic trading in those days and the internet was unheard of in business circles. A far cry from today&#39s coverage of the online world, where the media serve up a regular diet of articles and news of portals, websites, fund supermarkets. Clearly, there is some momentum here and hard evidence that at least some IFAs are starting to take advantage of the new opportunities on offer.

The traditional focus for the IFA market generally has been around business-to-business (B2B) applications. Not surprising, as this is where much of the provider investment has been placed to enable more efficient processes and cost reduction in the long term.

The B2B evolution willcontinue and has of late gain-ed its own momentum through the entrance of IFA portals (AssureWeb, Misys, Bankhall, Synaptic) into the market which was once the sole domain of The Exchange. IFAs must now embrace these services as the process model of the future and work towards integrating them into the way they do business. There seems little doubt that online trading will reach critical mass over the next two to three years.

However, the B2B services are only a part of the opportunity for IFAs and arguably the more mundane part – nothing really new, just a different way of doing it.

The real challenge for the IFA market is how online services can be deployed for business-to-consumer (B2C) applications. So what exactly does this mean?

A small number of notable IFAs have already started to develop services aimed at the surfing public at large. The more sophisticated offer online quotation comparison services for term insurance, with a traditional mailing or telephone fulfilment process.

Some have focused on Isa selections, with the ability to download and print applications which can then be returned with the cheque.

Other products such as bonds and personal pensions will also form part of these services in the future and processes will become slicker, allowing for online comple-tion and payment without signatures on paper or cheques in the post.

The potential of the online market has in addition attracted a number of new entrant intermediaries, focusing solely on this sector, without the distraction of an existing business in the background – and often with a high profile brand name to help attract consumer interest.

Financial services have never been more visible and the growing online channel is making inroads into the process of traditional advice.

Should all IFAs offer online services to consumers? The key to the answer is around “which” consumers.

Most IFAs could be sitting on a lucrative source of income from their existing client base, including group pension scheme members.

Farming client banks has long been touted as something that could be exploited further. But online services, aimed specifically at existing clients, may offer a very cost-effective way of at least communicating with clients and, at best, creating new business opportunities for either further advice, policy increments or low-cost online sales.

How many clients can an IFA realistically manage and service effectively using traditional methods? It is quite likely that the focus is on the 20 per cent that generate 80 per cent of the income, if the 80/20 rule applies. This leaves 80 per cent in “cold storage” and at risk from other channels. There is no guarantee to reach the whole of this group but, given current statistics, about a third will have access to the internet and this is likely to increase over time and the coveted 20 per cent may include people who would also be interested in doing some things online.

There has been a significant increase in IFA websites over the past couple of years as companies have felt compelled to create an online presence for fear of being left behind.

Many of these sites are a simple introduction to the business, with contact names and addresses, and maybe a list of specialisms. In fact, a more colourful Yellow Pages entry, which has been useful for the same reason in that find an IFA services have been developed to allow users to search for IFAs by postcode and it must be a simple advantage to be online for this purpose alone. We could call these first-generation websites – public information sites with mainly text content and little functionality.

The challenge for IFAs who want to develop closer online relationships with clients is to move from the public service to an exclusive and private service, secured by passwords or digital certificates – an extranet.

It is not simply a case of using a software company to develop the infrastructure, it is just as much about managing the service when operational. This would include authentication and registration of users, removing users, and answering queries. The more services offered, the more important user management becomes, and clear responsibility isneeded in allocating it.

However, the rewards are high. A secure service opens up almost limitless oppor-tunity for contact with clients. The very fact that a website is being launched is a reason to contact clients, either by mail or phone, to offer initial registration. This can also be a good way for IFAs to find out which of their clients have email addresses, and more importantly, which clients would actually prefer email as an alternative communication channel.

The second-generation site is likely to be more of an online magazine to communicaterelevant news, special offers, changes in legislation, up-to-date financial data and market reports, etc.

For this to be effective and useful it needs regular, if not daily, updates to create a changing picture to encourage regular usage. Again, as with security, this needs maintenance and ownership but could create value in terms of the IFA&#39s visibility with clients, loyalty, and the ability to prompt users to take further advice.

The next stage of development, call it third generation, will be to offer secure client access to policy values and performance, and the ability to make some simple purchase transactions online. This requires more sophisticated and robust systems and indeed accurate data, supplied regularly by product providers but it is possible and there are some organisations already deploying these services, notably in the investment fund market.

In terms of product purchases, IFAs will take a closer interest in this within the boundaries of financial planning advice. However, for low-cost products such as Isas, it may be more cost-effective to offer a preferred range online within the extranet and allow the client to select and complete. In the future, new enquiries for stakeholder pensions could be simply direc-ted to the IFA&#39s online serv-ice for completion.

All this must sound expensive and companies are spending hundreds of thousands of pounds on online services. But each individual business needs to build its own plan, understand the priorities and invest based on the potential returns. There is no answer to “how much?” but the law of diminishing returns will apply at some stage as, given a stable number of clients, there must be a limit beyond which further investment has little effect.

What is clear is that the client relationship that underpins the IFA sector can be significantly strengthened and brought closer by practical use of onlineservices. It is here that quality businesses of any size can focus their efforts and build what in time could be a significant differentiator in terms of the proposition to the client. And for those who want to go for the mass market – best of luck.


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