If you sometimes wonder why there is so much fuss about the internet, ask yourself these simple ques...
If you sometimes wonder why there is so much fuss about the internet, ask yourself these simple questions:
l Why are so many people excited about it, if it is just a storm in a teacup?
l Why are internet shares 'flavour of the month' on most stock markets?
l Why are there so many product providers and intermediaries already on the internet?
l Can I afford not to be there?
To some extent, the internet is all about perception. If you are not on the web, can clients and other professionals take you seriously? At a deeper level, there are more fundamental issues involved.
Electronic trading is all about cost-effective communications with both clients and product providers. Everyone knows the financial services industry is currently under pressure to cut costs and provide an even better by which most people mean faster service. Using the internet to make offerings to consumers can not only spread the net wider, but also speed up the perception of the service they get.
Basic technology
Even at the most basic level of technology, a consumer can log onto your website in order to request a personal illustration and fill in their details on an enquiry screen. Pressing the send button gets the request to you almost instantaneously and enables you to obtain comparative quotes, responding within hours. That beats the post by many days if you take into account how quickly the internet allows you to get the information you, in turn, want from product providers.
If you have a more sophisticated site, it could allow you to acquire enough data to pre-fill an application form, while delivering a personalised illustration online. It may not yet be possible to accept applications entirely electronically, due to signature issues with the banks, but at least an application can be printed out by the enquirer and sent by post. If the application is also electronically transmitted, it may be possible to start underwriting while awaiting the paper copy.
The internet can be used for promotion of services, not just for selling. If you are not keen to go as far as inviting enquiries, at least having a website allows you to publicise yourself to anyone who sees your stationery which should include your website address or is just browsing. A simple search on an internet search engine threw up an IFA website as the top listing on the search word 'investments'. This is a good advert for the individual IFA, as well as for the sector as a whole.
There is a school of thought that people will not buy over the internet. But there is strong evidence that, even if this was once true, it certainly no longer is. At least one bank offers an exclusively internet facility, in return for higher interest rates.
And not only are buying habits changing, but so is the profile of those accessing the internet. The over 50s comprise a large percentage of internet users. They have disposable income and the need for protection. However, unlike younger people, they may have more complex needs, and be prepared to pay higher premiums. The basis for this assumption goes to the heart of the service provided by an IFA. It also meets the question: Are life assurance and protection plans too complex to sell over the ether?
Electronic illustrations
In general, it is easy for those with family responsibilities to recognise the need for income protection, both in the event of death and incapacity.
Illustrations for these products can easily be provided electronically and many people may think that they can buy a suitable product without recourse to further advice.
Whatever we may think about this view and it is certainly true that most people still need to be encouraged to buy adequate cover there is no doubt that the needs of the older person are more complex and will still require input from an IFA. However, if the IFA does not have an internet presence, then consumers may be forced back on to direct writers, with a consequent loss on impartial advice.
There are a number of issues relating to using the internet as a way of promoting independent financial advice, or trading electronically, including compliance. Internet sites are covered by the normal compliance rules on advertising and it is also useful to remember that anyone, anywhere in the world, can access your website, so it is important to make it clear that you are regulated to operate in the UK only. But there are also considerations regarding sales practices, which must be addressed, such as fact-find based advice versus execution-only sales.
In practice, the medium is largely irrelevant; what you would do face to face is what you should also do over the internet. But caution is advised and, if giving advice, it must be based on a thorough understanding of the client's needs.
Establishing a website
It can be relatively easy to establish an internet site. All you need is to register a domain name, which can cost anything from £80 to £150 for two years, find an internet services provider and, if you want to, design your own site on a suitable software package. In practice this may not be to everyone's liking and there are a number of companies who are capable of designing a suitable website for you. Few, however, will offer the writing skills necessary for financial services, but these can be bought in separately.
For most practical purposes, an internet site can be established for less than £2,000, although if more complicated services are to be provided, such as illustrations online, or more complicated calculation facilities, the costs can be much higher.
Whether or not it is essential to offer online quotations is a matter of some debate. There are ways of achieving this, even if you do not wish to go to the expense of creating your own calculation facility, and you may be able to link your own internet site to a suitable service. But doing so would generally mean that the visitor leaves your site and moves on to another part of the internet. And there is no guarantee that they will ever come back. In any event, it could easily be argued that cost is not the most important part of the financial planning process. What counts is identifying need and helping the consumer
to recognise that something has to be done to satisfy that need. This can be achieved without recourse to expensive calculation routines, via case studies and simple self-check facilities.
One of the most frequently asked questions is: 'How can I get people to visit my website?' There are no easy answers. In general, there are two key groups that you wish to attract. Existing contacts not just clients, but everyone you know can and should be encouraged to visit your website, in order to see what you offer. This can be achieved by promoting the site as an additional service in the normal course of your business and through direct mailings and even local advertising. Just because the internet is worldwide, we should not forget that users live next door as well. And what about all your business contacts; not just corporate clients and all their employees, but also professional introducers?
The second audience is everyone else. Clearly one of the key reasons for investing in a website is to increase profitability. Selling more business is just as important as reducing costs. Getting new people to visit your site is a valuable way of reaching new clients. This can be done by careful use of the information given to the search engines, when you register your website with them. But it can also be achieved by purchasing what are, effectively, priority listings from some of the more popular search facilities, who can ensure that you are selected on key words, within a geographical area. This is rather like paying more to have your name in bold in a telephone directory, or your logo printed alongside your listing.
Long-term gain
Can you afford to do nothing? In the short term perhaps. But in the longer term, if the independent sector fails to take advantage of the opportunities the internet offers, it may see market share rapidly moving away from it, towards direct writers. For some, the internet is still a closed book. But for many, it is an opportunity to offer a more professional, faster service to an increasing number
of clients. The possibilities are endless; the risk of doing nothing potentially immense.
If you are interested in developing an internet site, there are a number of specialised companies operating in the financial services sector, including IFA Systems, who can be contacted at www.ifa-systems.co.uk.
Stephen Phillips is proprietor
of Phillips Marketing. Website: www.phillipsmarketing.co.uk
