The recent Sandler Review of the UK's retail saving industry has been widely viewed as a threat to a...
The recent Sandler Review of the UK's retail saving industry has been widely viewed as a threat to advisers. The proposed introduction of a suite of stakeholder-style savings products that can be sold without regulation through banks and supermarkets has opened up the prospect of advisers playing a less significant role in consumers' financial planning.
The role of advisers has also been challenged by other proposals in the review. Sandler's suggestion that the title independent should only be retained by advisers that are not paid by providers has been regarded by some as making the adviser less, rather than more, accessible to the general public.
More customers, it has been argued, would be deterred from visiting an adviser by the prospect of paying a fee contingent on sale than if commission arrangements between advisers and providers remain in place.
The danger in the situation, as many have noted, is that customers will be under the impression they no longer need to consult advisers and instead may buy unsuitable stakeholder products without taking independent advice. This situation will be exacerbated by the expertise marketing-led companies such as supermarkets and banks can bring to persuading their customers to buy stakeholder products.
For advisers to attract clients, they will need to reassert their position as independent professionals who can help customers select and purchase the savings products best suited to their circumstances. In short, advisers will have to demonstrate the value of their services to the public. They will, therefore, have to take on a more visible role in educating the public in how to manage their finances.
Sandler argues that raising financial awareness in the general public is essential for narrowing the savings gap and advisers can step in to play a key part in this process. If they can help the public understand not just how best to save but also why they should, they can expect the goodwill and knowledge engendered to transmute into consultations and fees.
The latest generation of web tools offers advisers a way of educating people about the importance of financial planning and how best they can manage their finances throughout their lives. People that might not otherwise contemplate going to see an adviser or think they cannot afford to, will be able to obtain financial advice and see for themselves how effective that advice can be.
Web services can fill a vital role in distributing adviser expertise in a form that is cost-effective, comprehensive, accessible around the clock and imposes no extra time demands on advisers themselves.
Online goal planner tools allow visitors to an adviser's website to plan life events such as starting a family, buying a home and retirement, as well as analyse the effect on their finances. The website visitor enters information on salary levels, monthly expenditure, mortgage payments, assets and debts into the goal planner, which then produces a timeline of net worth into which long and short-term life goals can be inserted. Visuals, such as graphs showing changes in financial assets, illustrate necessary levels of saving in a form that is appealing and educational.
People will subsequently be more likely to consult an expert that can help them arrange the financial provisions they need and be more focused on their particular requirements during the consultation.
More specific advice on product selection can also be offered to potential customers through financial advice online solutions, which use virtual advice tools to profile customers' attitudes to risk and investment goals, and then recommend types of product.
The profiles generated by this can be used as a basis for cross recommendations across a whole range of products, services and investments. The FSA's requirement for full clarity of explanation on the implications of investment can be met through a combination of text and graphics that can explain categories of risk and the implications of financial decisions.
For advisers aspiring to set up different systems, there are few complications. Customisable packaged software that automates both the fact find process and the delivery of advice can easily be installed. As markets change, organisations themselves can reconfigure the software to change the advice.
These solutions will also soon be available as an ASP service, making them available without any large, one-off cost. Transactional capability can be easily established through a back-office link to existing systems or a fund supermarket.
Online customers able to compare and rank products at their leisure may discover a non-stakeholder product is more suitable for their circumstances than the stakeholder version. By the time an adviser sees such an informed customer, the prospects of a sale-contingent fee will be greatly enhanced.
As well as having to find new ways of reaching savers, advisers will need to reduce operating costs and improve customer service.
Up to 60% of an adviser's time is spent on administrative tasks and a considerable amount of that is spent providing valuations. Online valuation solutions that link advisers to product providers can replace valuation requests by phone and fax, as well as provide graphic displays of different measures of valuation. These can be presented through the adviser's own website.
It might be that fears concerning the possible marginalisation of advisers following Sandler are unfounded. Stakeholder products may grow the market beyond the high-value individuals that make up an adviser's traditional customer base. In the new scenario created by Sandler, those who can deliver value-added online services cost-efficiently stand not to lose clients to stakeholder products but to win over new customers that would not otherwise have considered them.
Dave Patel is managing director at DPR Consulting
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