Independence day

The Financial Services industry is undergoing a number of developments that are set to change the provision of financial advice. Among the key influences of this change are the rapid advances in technology and the changing regulatory framework.

At present, the arrangement for the provision of financial advice is very clear. The Financial Services Act 1986 states: 'Those offering advice must be either independent of any product provider, or tied to one provider and its products only.' Consumers can therefore choose to take advice from an adviser, who offers a limited choice of products, or from an IFA, who can offer advice on the whole market. But with the proposed relaxation of the polarisation rules, this may be about to change.

Cap Gemini Ernst & Young claims the introduction of multi-tied advisers will fundamentally alter the balance of power within the market for financial advice. It is also believed by many in the industry the increased competition that will come from the multi-tied sector will cause many IFAs to become tied agents themselves.

Making a stand

In order to compete with such developments it has been suggested that the IFA market needs to become more flexible and technologically orientated to continue offering their clients a superior service and a high level of financial planning. Many professional IFAs have already embraced some of the latest technologies and are consequently reaping the rewards.

It is the role of the IFA to research the entire marketplace in order to find the best product for their client. Over recent years, desktop research tools have been developed, allowing IFAs to carry out client-focused product recommendations from the total market availability and produce client specific 'reasons why' reports in minutes. These tools allow the user to filter through the available products to a select group that meets a client's needs. The contracts can then be ranked based on a number of different criteria. Once the research process has been completed, IFAs can be confident they have addressed every available product and selected the best contract for their client.

An independent advantage

Independence is a major competitive advantage IFAs have over tied agents and the soon-to-be multi-tied advisers. Such research tools can help them with the logistics of searching and selecting from the whole marketplace and also ensure they are kept up to date with all the latest product developments.

Industry professionals have developed these desktop research tools with the adviser in mind. They are user-friendly and free training is often provided. Due to its ease of use, IFAs can conduct the research process while consulting their clients. This not only illustrates a high level of professionalism, but also highlights the amount of choice available.

Key to the future

Many IFAs have used desktop research tools to develop their business over recent years. According to research by Prodata, 74% of IFAs believe technology will be key to their future success. With this in mind, it is worth looking at further technological developments that are set to help IFAs offer a sound service to their clients.

Far from being the threat that some commentators predicted, the possibilities offered by the internet to the IFA will, in time, prove to be one of the most valuable advances the sector has seen to date. Already there are numerous online services for IFAs that are free of charge. Such services offer a range of advanced features including fund information, industry and market news, financial calculators and perhaps most importantly, the ability to gain instant quotations directly from the leading providers.

These advanced services can integrate with the leading product research systems in the market and pre-populate the quotation requests with essential client and contract details ' reducing the time spent in the decision-making and administration process.

An exciting step forward over the last six months has been the introduction of e-commerce to the IFA community.

Onwards and upwards

Services have emerged from the leading technology companies, providing IFAs with the capability to submit new business application forms direct to the product providers. Electronic transmission enables providers to start processing the forms almost immediately at a fraction of the associated time. Providers have also introduced attractive enhancements for the submission of electronic business, encouraging the marketplace to embrace this latest time-saving technology.

Traditionally, IFAs have lost out in the self-select market to direct providers. Statistics show this is largely due to the need to prioritise and spend time on more lucrative business from clients in higher socio-economic groups. The Office of Fair Trading's report on the existing polarised distribution channels suggested they are incapable of serving low-income consumers. But internet technologies, if used correctly, should allow IFAs to develop business from commodity style, lower revenue products.

In recent months, there has been a flurry of new web-builder services launched which are aimed at the IFA market. Interest in and use of the internet as a business tool has expanded phenomenally. More people are getting their first impression of a company from its website, with many preferring to investigate an organisation's credentials online before contacting them in person.

Constructing a website that allows both potential and existing customers to search and buy commodity products in a cost efficient way should provide IFAs with two new opportunities. Not only will it give access to the potentially lucrative self-select market, but should also provide a valuable lead, encouraging potential customers to seek advice from their full-service arm.

Service providers offering web-building solutions also offer links to the leading consumer finance portals. Such links can direct more traffic to IFAs' websites which could lead to new business.

It is encouraging to see so many professionals embrace new technology with open arms. But IFAs need to ask themselves whether they are confident they have the right technology partners to offer them the correct support to enable their business to expand into the future.