Technology is playing an increasingly important role in theway IFAs conduct their business. David Child reports on theattitudes in the market
The Technology Index is an annual survey of IFAs, carried out by The Exchange, which explores how technology is currently being used, what IFAs see as the main benefits, and how they think technology needs to be improved if it is to play a greater role within their business.
One of the overall themes in the industry over the past year or so has been that the increasing impact of new regulation, such as depolarisation, and the spread of regulation into new markets, such as mortgages and general insurance, is leading to an increased focus on technology to reduce costs and improve efficiency.
Looking in detail at the findings of the Technology Index should tell us whether this is indeed the case.
Encouraging This year, 300 IFAs completed the survey via the Exweb portal and one of the key findings was that it is estimated that £3.
2bn of business will be transacted electronically by 2009.
This is based on the fact that 55% of respondents believe they will be conducting at least half of their business electronically in five years' time (see Figure 1).
These figures are very encouraging and show that the use of e-commerce services is growing rapidly within the IFA sector.
One of the main reasons for this growth is that over the past year, a lot of work has gone into ensuring e-commerce services are aligned with the business processes of IFAs and are as easy as possible for them to use.
For example, there is now far greater integration between IFA portals and other back office systems and research services that IFAs use.
This greatly improves the speed and ease of use of quotation and electronic new business services.
IFAs can now enter client data once into their client database and then automatically transfer this data into quote services and electronic application forms.
By removing the need to re-key data, this reduces the administrative burden on IFA firms and delivers practical benefits to their business.
Another significant improve ment that helps IFAs is greater flexibility in how electronic appli cation forms can be used offline or online, saved and shared with administrators.
In addition to being able to complete and submit new business applications while online, it is now quicker and easier for advisers to download an electronic application direct from their portal service to their own computer.
They can then complete the electronic application, either with or without the presence of the customer, disconnected from the service and within their own timescales.
Flexibility All these developments are based on feedback from IFAs, so it is not surprising that they are making the task of switching over to electronic applications significantly more attrac tive to IFAs.
The fact that the way the technology works is now closely aligned with the way IFAs want it to work means that IFAs are increasingly realising the benefits e-commerce can deliver.
In addition to the improvements in the technology itself, the Technology Index suggests that regulation is indeed having the impact that everyone expected.
A massive 92% of IFAs surveyed said they intended to retain their independent status following depolarisation (Figure 2) and technology was viewed as the key to operating effectively in a depolarised world.
More than half (56%) of IFAs are expecting to increase their use of technology as a direct result of depolarisation, with none anticipating a reduction in their reliance on electronic transaction methods.
Depolarisation Depolarisation was first announced when CP 121 was published just over two years ago.
Back then some people reported that it would spell the end of independent advice and that the services that support the independent sector, such as IFA portals, could lose a significant amount of customers.
However, clearly the indep endent sector is here to stay.
IFAs are largely entrepreneurial businesses that have survived many changes over the years and the nature of the impartial advice that they provide to consumers is far too valuable to lose, and indeed this was never the intention of the Financial Services Authority (FSA).
What the FSA was trying to achieve was the creation of a new breed of financial adviser that could offer sound financial advice to those consumers with simpler financial affairs who did not need the level of sophistication a 'whole of market' adviser provides.
What's more, that advice needed to be affordable and accessible.
The main aim was to extend the provision of high quality financial advice to a wider range of consumers.
In order to offer high service levels, multi-tie organisations must put in place streamlined business processes that are cost effective and as efficient as possible.
To do this they must make the best use of technology.
The existing e-commerce services that have proven so successful in the independent sector are equally relevant to the multi-tie sector and can offer companies looking to establish multi-tie organisations significant benefits.
By utilising the existing technology service that advisers are familiar with to set up their multi-tie operation, IFA firms can get a low cost, low risk route into the depolarised market.
Regulation Technology can help IFAs manage a flexible panel of providers - quickly and easily changing providers if necessary to suit their business needs and switching from panel to whole of market access, if required.
Portal services can help multitie businesses produce company specific and comparative quotes for panel providers and submit new business applications elect ronically to each provider.
Further efficiencies can be created by integrating these portal services with the adviser client administration system to enable straight-through processing by facilitating the automatic transfer of client data into quotes and application forms.
Advisers can also link directly to panel provider extranets via Exweb, giving them a choice in how to submit new business.
The other area where regulation has had an impact on the use of technology is mortgage regulation, both directly for mortgage sales and as a result of mortgage brokers looking to cross-sell rela ted protection products.
Of the 200 mortgage advisers that responded to the 2005 Technology Index, 47% said that the onset of FSA regulation of the mortgage market had increased their costs as a result of having to ensure compliance with the new rules.
If they are going to continue to run profitable businesses, these mortgage advisers are going to have to find ways to offset this additional expense by reducing costs in other areas.
The 2005 Technology Index shows that mortgage advisers see technology as a way of achieving this, with 68% of respondents expecting their use of technology to increase as a result of mortgage regulation.
These advisers are looking to streamline paper-based business processes and remove a large chunk of the administration costs they have traditionally faced.
Business benefits Their preferred way of doing this is via mortgage sourcing systems.
There has been much debate recently about the role sourcing systems have to play in the market, with lenders and sourcing suppliers jockeying for position within the regulated market.
However, the 2005 Technology Index shows that sourcing systems are mortgage advisers' preferred route for interacting with lenders for mortgage quotes, key facts illustrations (KFI) and submission new business.
So, although mortgage regulation has undoubtedly created challenges, it also presents advisers with opportunities to expand their businesses into other product areas.
Now that they are regulated by the FSA, mortgage advisers are also subject to both the new depolarisation rules and general insurance regulation.
Many of them are taking advantage of this by looking for ways to cost-effectively sell protection products that are related to their mortgage sales, whether that is via a whole of market, multi-tie or panel arrangement.
The move into other product areas is another example of where technology can help.
Intermediary portals, such as Exweb Broker, give advisers access to both Mortgage Brain and Trigold, the two leading mortgage sourcing platforms in the market, as well as to the market leading research, quotation and transaction services for rela ted insurance products, such as term assurance, critical illness, income protection and household insurance.
This enables advisers to quickly and easily search the market, produce compliant client specific quotations and, where possible, submit the application electronically direct to the product provider.
Just like IFAs looking to move into the multi-tie market, technology provides mortgage advisers with a low-cost, lowrisk technology platform that can power their launch into the protection market.
In the Technology Index, timesavings were cited as the core driver for IFAs to adopt and use technology, with over half of the IFAs questioned (51%) saying this was the greatest benefit.
This is around a 30% increase on those IFAs (39%) who named timesavings in the 2004 Technology Index.
Improved customer service (22%) was identified by IFAs as a core benefit to be gained from technology and reduced costs to the business were also cited by 18% of those questioned (Figure 3).
However, it is important to note that the development of e-commerce services is very much an evolutionary process and that there are still areas for improvement.
Around half (43%) of the IFAs that took part in the Technology Index said technology must deliver better electronic application services over the next 12 months to encourage them to make better use of it, with 22% looking for greater transfer of data between applications.
Integration This is a key point.
Although these examples show that great strides have been taken to remove the need for IFAs to re-enter client data multiple times, there is still further progress to be made in integrating separate technology systems.
Most existing integrations are just one way, for example, data can only be transferred from back office systems into quote and transaction services.
The Technology Index suggests that IFAs feel they would benefit from being able to transfer data about the quotes they have carried out and the applications they have submitted from portals back into their client database, to be stored against each client record.
If technology can continue to deliver services that meet the requirements of IFAs in this way, the uptake of e-commerce will be the natural consequence and the entire industry will benefit from the time and efficiency savings it can deliver.
David Child is managing director at The Exchange.
COVER notes
• A massive 92% of IFAs surveyed said they inten ded to retain their independent status following depolarisation (Figure 2) and technology was view ed as the key to operating effectively in a depolarised world.
• By utilising the existing technology service that advisers are familiar with to set up their multi-tie operation, IFA firms can get a low cost, low risk route into the depolarised market.
• 68% of respondents expecting their use of technology to increase as a result of mortgage regulation.
