There is much valuable work going on to look at how a structure might be put in place to achieve this economically. Both the Thoresen review and the primary advice stream of the retail distribution review are looking closely at this subject.
Inevitably, solutions to this dilemma are going to need to involve an element of self-driven involvement from consumers. Digital communications channels must be the natural delivery for most, if not all, such services.
The key to this issue is how you make informed guidance available to consumers to help them reach decisions on their own when they can but make professional support and advice available once they need it.
I recently got to look at what some tools might make some of these highly desirable objectives a reality. The natural place to look for leading-edge adoption of digital channels is America and if one US investment firm has made a name for itself with its technology it has to be Fidelity.
Over the last six years, the company has developed a powerful range of tools enabling it to deal with its American customers more effectively. These are presently being adapted to meet the legislative and regulatory requirements in a number of other countries and the UK will be one of the first three areas to benefit when they become available here next summer.
Last October, I looked at how Funds Network is using its direct-to-consumer Sipp product to develop a referral channel so that customers who need more detailed advice can be directed to suitably authorised advisers.
The launch of a further generation of powerful analysis tools to consumers presents an obvious opportunity to guide even more consumers towards professional advice.
For some time now, the FundsNetwork site has offered a “my Plan” retirement planning tool. It is one of the easiest and most simple to use calculators I have ever seen. It conveys important messages about retirement planning and guidance of the amounts involved based on a client’s circumstance in simple ways that that even the most financially unsophisticated client should be able to follow.
These have recently been supplemented by a further set of profiling tools that enable advisers to help clients in conveying concepts on retirement planning, education, tangible assets and gifting as well as inheritance planning.
The next evolution of these services will be the UK versions of the tools already on offer in the States. These allow clients to build up detailed financial plans online and produce powerful analysis of their financial requirements.
These tools include the ability or people to understand their likely income in retirement and the extent to which this will meet their needs. Users can also track the performance of their assets over time and examine their exposure to risk.
Within these tools, they can make provision for regular income needs, the extent of emergency provision, their level of regular expenses and issues over attitude to risk.
One positive effect that Fidelity has experienced in the US is that when clients are left to themselves to enter details of their financial arrangements online and use modelling, they are far more likely to disclose additional investments that they may not previously have disclosed to their advisers.
The depth of analysis possible with the US tools is on a par with some of the best analysis software delivered to IFAs by client management systems. Obviously, there are benefits to advisers sourcing software from independent suppliers. However, by rolling out these tools to advisers and consumers, FundsNetwork is clearly going to raise the bar in terms of what an adviser will look for from their own software providers if the adviser is going to be paying the licence fee.
These tools should help advisers spend more time with clients more profitably. The consumers will have been able to spend time themselves modelling likely scenarios and solutions so it is reasonable to expect that they will have a greater understanding of the complexity of these issues and be more appreciative of the assistance they receive.
I have long believed that many IFAs make life too easy for their clients, so much so that the client does not recognise quite how much the adviser does for them. The adviser giving the consumer the ability to model some of these issues themselves should help address this.
It is clear to me that in making these tools available to advisers and consumers FundsNetwork sees its customer referral strategy as a key component of their distribution plans. The news that David Dalton Brown, executive director of FundsNetwork, who has championed the adviser referral process has now been give responsibility for the direct business as well as for the platform itself must be seen as a positive development.
Allowing customers to engage with the planning and analysis process themselves should make it far easier for advisers to be able to operate over a range of channels. If time and money are not an issue, it might be attractive to sit down in a face to face environment with every client but for those with limited holdings and little to spend meeting in traditional ways, it would simply be uneconomic.
Phone-based advice, where the adviser and client can both be looking at the same online analysis service, presents a far lower-cost alternative and in many cases may make the relationship economically viable for the adviser and the client in situations where face to face advice would have meant the consumer was paying more for advice than they can afford or the adviser is subsidising the cost of the work.
The availability of powerful planning tools that can be operated remotely might, linked with a phone-based service, have the potential to provide an alternative to jettisoning less profitable customers.
In the brave new world where everyone is focused on profit and value, our industry is going to need innovative solutions to deliver quality products to consumers at prices they can afford. Services such as those being developed by FundsNetwork for the UK present practical ways in which this can be achieved. I am really looking forward to seeing what other providers come up with to help advisers build their businesses.