It can be uncanny sometimes how things can come together. No sooner had I
emailed last week's article on aggregation to Money Marketing, I answered
my phone to Euan Robertson, development director of Spektra Systems, who
invited me to Livingston to look at the toolset the company has built to
assist a wide range of financial services companies with aggregation.
Possibly, I should not be too surprised as the opportunity offered by
aggregation had been high on the agenda when I ran some workshops with
I have to confess, however, to being stunned by the speed at which the
company has come up with a solution. Spektra has good credentials for
moving into the aggregation space. Over the last year, it has developed an
excellent reputation among a number of insurers for accelerating their
integration with the various IFA portals.
Speed to market is critical in our rapidly changing environment. The
sooner we have a range of fully populated portals, the sooner IFAs will
have real choice in their technology partners, so work like this is very
valuable. Spektra clients include Norwich Union, Scottish Equitable and
Standard Life, all of whom, in my experience, speak very positively about
Although I have been predicting the emergence of aggregation in the UK for
nearly two years, all of a sudden it seems to be the word on everyone's
lips in the UK.
As Money Marketing reported last week, a number of players are planning to
launch aggregation services in the near future.
Most of these are direct-to-consumer offerings and it will be important
that providers which support the IFA community develop the capability to
support IFA aggregation services as a matter of urgency, otherwise the IFA
community could again be perceived as offering an inferior level of
technology support to its customers compared with some of the new direct
No summary on aggregation can be complete today without considering its
impact on depolarisation. One of the things that is increasingly worrying
me about the IFA market today is the number of advisers who consider it
unth-inkable that the FSA will not continue along the path that it has
already taken, introducing the adopted product regime for other products
after the stage two review.
To do anything other than proceed with an extension to the rule adopted
for stakeholder forces the FSA to face some unpalatable choices. It must
either admit it got it wrong when creating the new rules for stakeholder
(and we all now how often regulators admit they got it wrong, even ones who
benefit from statutory immunity) or be honest about the fact that it was
not really its decision at all but it was simply acceding to the will of
its political masters (not very likely unless William Hague or Charles
Kennedy win the general election).
What really worries me is that very little seems to be going on to prepare
for a situation where the answer to phase two ends up looking exactly the
same as the answer to phase one.
My mind flashes back to the days before the original Financial Services
Act hit the statue book. The vast majority of the soon-to-be IFA community
was completely blindsided by the legislation and, with the exception of the
excellent work done at the time by the Campaign for Independent Advice,
which ultimately began both IFA Promotion and Origo, IFAs were virtually
ignored by the Government when creating the legislation. As a result, IFAs
ended up with Fimbra, a wholly unsuitable regulator for the vast majority
of the firms it was authorising.
It is a testament to the resilience of those who call themselves IFAs
that, nearly 15 years later, they are the dominant distribution channel.
Personally, I believe we will end up seeing more change than most IFAs
would like on polarisation. The IFA community should stop just saying no
and become involved in putting forward a range of alternatives that will
allow for a mix of polarisation options.
At this point, you are probably saying, what has all this got to do with
aggregation? Actually, it has a great deal to do with it. I believe one of
the biggest weaknesses of the IFA proposition is the fact that the
indirect-benefit rule has made it far more difficult for product providers
to introduce electronic processing.
If we saw some relaxation of that rule, where it could be demonstrated to
drive down costs to consumers, aggregation technology has the potential to
vastly reduce the cost of maintaining client relationships with multiple
What makes the Spektra proposition so different from many of the other,
mainly US, aggregation solutions I have seen is that it is not primarily
based around so-called screen scraping. This is a process in which the end
customer lets the aggregator have their ID and passwords for the various
underlying services from which they want to gather information.
The technology uses the ID and passwords to present itself to the main
information provider, for example, a bank and building society, and gets
the information as if it were the customer.
I have heard it suggested in recent weeks that regulators may be
uncomfortable with this approach.
It is readily admitted by many people establishing aggregation solutions
that this is far from ideal. Although they can accommodate screen scraping,
the Spektra Open Finance Services are based around cooperation between
financial institutions. This involved the use of industrystandard messages
being exchanged between institutions in the full knowledge of the purpose
for which they are being used.
The skills needed for this are far more akin to those employed in
integrating institutions to business-to-business portals than they are to
unknowingly grabbing information from other institutions as if you are
Although the internet is clearly the most appropriate delivery platform
for aggregation services today, these services have been built so that they
can also operate over a range of different platforms. During my discussions
with Spektra, I was shown the tools working on iDTV, Web TV, a hand-held
Compaq iPaq pocket PC and a Nokia communicator.
Although it is early days, I was very impressed by the progress that the
company seems to have made.
I believe it is essential that IFA product and service pro-viders start
taking action now to ensure we have a level playing field between the new
media players such as Virgin Money and Egg, so many of whom are expecting
to use aggregation to enhance their customer proposition, and the
advice-based intermediary, whether IFAs or the increasing number of
multi-tie advisers, who I expect to emerge after the phase two polarisation
Although aggregation is not going to take over the market overnight, in
the next couple of years, it will start to have a significant effect on
what consumers expect to see from organisations providing financial
services. I am delighted to see that the market is not going to be supplied
solely by US players.
Ian McKenna works
as a consultant for industry organisations such as Origo, life offices and
technology companies, including Microsoft, Assuresoft and The Exchange.
He is a consultant
and director of The Financial Technology Centre. He can be
contacted by email at: IanMcKenna@msn.com Tel: 020 7359 5656
Fax: 020 7359 2858