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WAP&#39s it all about, IFA?

Last year, dotcom companies suddenly impacted on the public consciousness through a bombardment of advertising. Now almost every advert displays a web address.

We know the technological revolution is accelerating in our industry too. It is impossible to ignore the array of on-line services now offered to IFAs. The public have a wide choice of financial websites to increase their understanding of services and products. Add to that the arrival of fund supermarkets and clearly the industry is changing across a broad front.

In financial services, the internet will impact particularly dramatically because it is a catalyst for several existing forces. This is especially evident in stakeholder where consumerism, regulation and competition are forging an ultra-low-cost trading environment – one only made possible by harnessing the web.

Demand for electronic trading among IFAs has been growing since the early 1990s. The convergence of market forces and technological capability are now allowing more efficient business models to take root.

There are huge challenges inherent in transforming the business landscape but the mood among IFAs is upbeat. Shaun Godfrey of Bankhall Investment Associates is irrepressible in his optimism. “IFA portals will be a hugely positive influence on our industry,” he says. “It&#39s a massive improvemen
t for the speed and efficiency of IFAs.”

Of course, not all IFAs want to embrace business change. Some specialists dismiss technology as being of limited relevance to businesses based on referrals and enduring relationships with wealthy clients. Such people, we are told, are suspicious of technology and recognise that the value of independent advice lies in the art of investment planning.

This traditional approach is still relevant for a proportion of clients – a niche which may remain profitable for quite some time. But as each year passes, the technophobic population reduces while those conditioned to use electronic tools to find best value become emboldened.

Let&#39s also remember that a major Government publicity campaign on stakeholder is expected in the new year

and it is likely to highlight pricing issues. The Government has been looking at the US experience with 401(k) and fund supermarkets as a model from which we can learn.

In this context, we should anticipate growing customer demand for cheaper products across the range, more choice and improved access. These features currently differentiate the front-runners. Soon they will become important factors when launching new products and services. Sceptics cite low internet transaction volumes to argue that clients will always want personal service. This will certainly change.

Stakeholder front-runners are focused on web-based distribution and processing, particularly in the all-important corporate arena. There will only be a handful of winners in the sub-1 per cent environment and they will not be organisations which cling to traditional distribution and paper processing. Some providers already view iTV, WAP and coming generations of web-enabled devices as the future of their businesses. Traditional thinking argues that customers will not buy financial products by completing forms on a tiny hand-held screen but this fails to app-

reciate changing consumer behaviour.

Convenience is king. Customers expect the service they want, when, where and how they want it. Life is lived in bite-sized chunks – customers may see an advert and request details by WAP while waiting for their train, apply at home by PC or iTV and then follow up by phone afterwards.

And they will expect it to be instant and seamless. It&#39s not a choice of channel – it&#39s about having it all.

These observations are causing some IFAs to consider the fundamental nature of their business. Are they professional practitioners or business directors? What is their primary service – advice, information or brokering services? Where are they prov-

iding value and how much is

it worth? What services will customers require in the future?

Such questions underpin the profitability of any business but historically many IFAs have not paused to consider the suitability and relevance of their approach. IFAs like Ian O&#39Connor of Alliotts, however, have no doubts about what they offer customers and its value. O&#39Connor says: “It is holistic financial planning, with the emphasis on planning.

“Technology is very important but customers who select investments on the web may not ensure they are appropriate to their broader financial circumstances. How many people who bought technology funds this year decided to drip feed their investment?”

Godfrey shares this view, believing consumers faced with greater choice in the internet age will turn to IFAs to resolve their confusion.

Considering the nature of an IFA business often leads to a comparison of the extremes. The conclusion is drawn that while a traditional niche may not be viable in the long-term, an internet infomediary service invites disintermediation and fails to make use of financial planning expertise.

So where is the middle ground? It is in the complexity of financial affairs that IFAs are best able to demonstrate their worth. An advice-centred approach works if supported by a modern attitude to charging and new IT capabilities are harnessed to improve costs and service.

Les Sharpe of Leigh Williams explains: “Technology is changing the way we do business – providing financial information for customers on our website is a good example, but there is still a psychological barrier for IFAs to overcome. It is: &#39I now have to charge for my advice – including management and research time.&#39 The client must understand that clearly, whether the charge is a fee or translated into an identifiable commission amount.”

This implies tactical use of technology to fit changing market dynamics and the enduring value of professional financial advice. Baggette Tyror, for example, has invested heavily in IT – in training, time and resources – to improve service.

Jon Tyror says: “It helps us that providers now want to provide web services and we in turn use our site to provide information to complement our traditional client service. We only need to interact with our clients to give additional financial insight – the object is to maximise the amount of time our advisers spend doing just that.”

The message seems to be that IT does not undermine the need for personal relationships and IFAs are too commercially aware to ignore the benefits it brings to their businesses. In fact, they are willing partners in the business revolution.

They understand product providers are being drawn to the web to achieve economies in the sub-1 per cent trading environment and that engaging with them electronically will secure the most advantageous relationships.

Some IFAs are in fact frustrated that the pace of change has not been faster and traditional processes are still the daily business experience. Sharpe longs to conduct his business online. He says: “Ideally, I want a paperless office.”

It is small wonder that there is such interest in the arrival of competing fund supermarkets – life and pension providers should take note as they will increase the demand for more web services in other product areas.

With electronic signatures we may expect that web transactions will soon become the norm, creating more time for IFAs to spend with clients who prefer and warrant a face- to-face service. In time, even these may accept that a “virtual meeting” online with videoconferencing, document manipulation and straight through processing has benefits in terms of time, cost and convenience.

If the key benefits of all this new technology to consumers are choice and convenience, the same applies for IFAs. Technology provides a range of business approaches to suit individual circumstances.

Twenty years ago, the market was relatively homogeneous with small IFA firms generally conducting business in a similar way. Now an IFA can be anything from a one-man traditional operation to part of a multinational organisation. The way new technology is applied to the client relationship will differ enormously too.

We are sailing in unchar- ted waters. There is no accepted business model for IFAs to follow in the technological age. Businesses must rely on common sense and intuition to guide them and return

to the basic considerations

of customer service for inspiration.

And when our forward-thinking IFA sits at the PC to write “Business Plan – 21st Century”, a voice from a previous age may come to mind and the first line will read “Customer Service – Anytime, Anyplace, Anywhere.”


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