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The code for the e-road

Many of the bigger IFA firms are gaining access to new capital with the regulatory regime ready to remove the better than best advice restrictions, making it possible for providers to take unlimited stakes in IFA firms when previously they were only allowed to own less than 10 per cent of any individual IFA.

Providers are looking to increase their stakes in IFAs. This will give the bigger IFA operations their first real opportunity to update systems, moving to highly automated electronic processes designed to cut admin costs, increase efficiencies, protect margins and better serve the customer. They cannot afford to squander this opportunity.

IFAs that do not divert some of their funds to modernisation will find it increasingly difficult to compete. Some may have changes forced on them by the providers building stakes in their businesses.

Many providers have been investing in their own infrastructures to create platforms for doing business electronically across multiple platforms. We have seen evidence of this in more than one major provider. These firms will be keen to get the benefits of this by encouraging their distribution networks to go electronic as quickly as possible.

Assuming that major IFA operations will have the capital to grapple with the issues of doing business electronically, how best can they go about managing this? After all, e-business is likely to be a new development for most of the executives running these businesses.

From experience of working with many providers and IFA operations on these sorts of projects, we have compiled some tips for the e-road.

The first step is to assess the company&#39s attitude to technology. Is it business-led or hampered by technology? Is there an IT person such as a chief information officer sitting on the board or executive? How do people talk about IT at senior level and throughout the company?

Is there frustration about how long it takes IT to roll out a new product or is the IT department active in discussions at the inception of a project, enabling it to be successful?

If answers to these questions indicate a degree of technophobia or under-investment in IT, this needs to be taken into account when leading an e-project. Under-investment could be justified before but is it desirable now, given the changing landscape created by CP121?

Once the degree of resistance has been identified, it will be important to get board-level sponsorship for the project. It needs to be built in a similar way to a business plan – with objectives, efficiency and cost-saving targets and details of resources, timescales and personnel needed to make it happen.

All this should be presented in comprehensive fashion to the board and budgets must be confirmed to support it.

The key to making these processes work electronically is process mapping. It is important to understand what the processes are and leave scope to expand or alter the processes as things change.

For example, the current new business process for life and pension products includes several stages in a product sale such as fact-find, needs analysis, identification of suitable products, quotations, comp- letion of application and submission.

It is important to look at these processes and variations on them to assess properly how they can be made electronic and deployed across multiple channels.

It is also important to consider the wider implications of any process automation project. Many providers and IFA companies are likely to need to consolidate and manage information more effectively. Electronic processing makes it possible to consider more effective servicing of customers in a semiautomated way that may be unsupportable in the manual, paper-based world.

It might now, for example, be possible to offer near real-time financial positions based on products bought through an IFA via that IFA&#39s extranet. It should be possible to check on individual fund performance and switch out of poor performers – all via the extranet.

Effective system integration is the key to making this self-management possible. It needs to be possible for the customer to query their own records and adjust their portfolio as required in a highly secure manner. Any plan should consider how the system will enable this to be done in the future.

What data is needed? Can the data collection process be modified to reflect changes in regulatory requirements or product type? What data can be plucked automatically from existing databases to avoid having to re-key information which the IFA has already gathered?

IFAs need to talk to their solutions&#39 provider to ensure the collection of data is easy and can be adapted to work across multiple channels without trouble.

Many providers will choose to gap-fill and will make white-labelling deals with other providers to offer products that they do not want to manufacture and support themselves.

Integration between these providers will need to be slick so when an IFA asks for provider X&#39s term insurance product, they and their customer do not even need to know that it is provided by provider Y.

More than this, the IFA will probably want its own branding at the point of sale. New technology based on internet communications language XML enables the rapid and intelligent movement of data while allowing for rebranding around documents as they are moved seamlessly between environments up and down the supply chain.

IFAs should ask providers what capabilities they have in these areas. It could make the difference between being able to offer customers a comprehensive product range online and being limited in the amount of products that can be sourced and processed efficiently via the internet.

E-project managers will also need to think about whether their IT department has the skills to help manage the project or build this sort of system and deploy it across multiple channels?

A report from IT consultancy Terence Chapman Group, which focused on the retail banking market as an early adopter of multi-channel e-business, cited that key factors delaying development of the new channels were skills shortages and concern about the complexity of projects. There is no doubt that both these issues could also hold back IFAs.

But these factors can be overcome by partnering with one of the many technology solutions providers now lining up to offer products, integration expertise and consultancy to help make the transition.

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