Providers selling intermediaries short online, says study
Many investment providers are failing to provide the necessary online servicing to intermediaries, according to business consultants E-Marketing.
The greater use of the internet is cited by most pensions and investment groups as the best means of cutting costs to survive within a 1% world but the consultancy claims many advisers do not feel this is taking place quickly enough.
Research by the group, which interviewed a number of intermediary and stockbroker firms, found that many felt fund manager websites were often badly designed, hard to navigate and contained information which was, more often than not, out of date.
Even so a number of groups are looking to make large investments in online technology.
Friends Provident is keen to increase its online capabilities, already applied to new life and pensions and bond business, across the whole of its product range and existing business.
Threadneedle, which backs Cofunds and Emx and launched its own valuation service earlier this month, intends to extend its online servicing to include actual dealing. According to Richard Eats this will take place 'in due course.' He said in the US it costs between 35 and 50 cents to execute a trade, because most of the transactions are done electronically there.
In the UK, by contrast, the average trade costs between £12 and £15, Eats said, because a large amount of transactions are still paper-based and so require more time and effort.
Eats said there is, therefore, clearly a lot to be gained from an investment company increasing its online services.
He added: 'Technology is important to us because, as everywhere in the world, margins are under pressure. We have embarked on Target 4, a programme to improve our technology services, both internally and externally, and this has led to us spending £15m over two and a half years.' A total of 43% of Threadneedle's phone calls are about valuations and so the introduction of its valuation service should save a lot of time and money for the group, he said.
Katharine Photiou, stakeholder services manager at Friends Provident, said online investment services are crucial to both investment companies and intermediaries in a 1% world where margins are tighter.
The group has spent £10m on improving its online servicing capability over the past eight years.
Photiou said this figure would have risen to nearer the £25m mark had the group's approach not been to integrate the new technology with its existing internal Gladis and Work-Glow Imaging system, which were set up over the past 25 years.
An online dealing facility is available across all of Friend Provident's mono-charged pension contracts.
All new group pension business is dealt with over the internet, while a large part of the new individual pension product business is also conducted in this way.
Furthermore, two years ago, one administrator could look after 500 Friends Provident members and this has now risen to a figure of 5,000. The group's aim is to double this.
Phoutiou said over the past 18 months, intermediary commission has decreased so it is necessary to write a higher volume of business at no extra cost.
As such the group's online service is designed to reduce human error to a minimum.
She said that in the past, 80% of application forms were submitted with missing or incorrect information.
Martin Scarrott, a consultant at Mattioli Woods Pension Consultants, is supportive of attempts by investment companies to set up online services designed for the intermediary. He said the Friends Provident service, for example, has substantially reduced administration time as well as ruling out a lot of human error.
He said: 'With the introduction of stakeholder charges, we can't afford to spend much time on this type of business.
'We still deal with a number of small group schemes in the old paper-based way. We spend about 10 to 20 hours a year running them, and it could take a quarter of that time if inaccuracies and mistakes were ruled out.'
Scarrott said a possible time-saving improvement for the intermediary would be for more investment companies to enable individual member access to their pension within a group personal pension scheme via their online sites.
The E-Marketing survey interviewed 13 intermediary firms and four stockbrokers.
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