Whether as a response to pressure from regulatory reporting, compliance or simply to improve customer service and increase operational efficiencies advisers are increasingly using a number of software tools as part of their jobs. Peter Brutin, sales technology manager at Standard Life, outlines the different types of tool available
Over the past few years many adviser firms have realised the benefit of using software or e-commerce-based tools as a valuable part of the business process. Whether these are simple calculators to help with tax, mortgages or pensions calculations or a more sophisticated portfolio planning solution, there are a whole host of extremely useful tools now on offer to advisers. Even better, most of these tools are completely free of charge and can be found on provider extranets, portals or as components of back-office systems.
Perhaps the only note of caution that should be made clear before rushing in to play with all these new tools is to remember that some of them are designed as basic guides to help consumers and many of these can be found on consumer websites. The tools designed specifically for advisers to use are generally more complex and will be updated more regularly in line with changing legislation and tax rates. It is these tools that are likely to be of greater value for an adviser to integrate in the business process and some of the most popular ones deserve further analysis.
Portfolio Planning Tools
Whether an adviser specialises in investment or offers a broader range of services, understanding and managing clients' risk is a fundamental part of the advice role.
Portfolio planning tools help advisers to consider a client's attitude to risk and measure risk over a variety of timescales. While most standard risk questionnaires serve a purpose for an initial client meeting by enabling the adviser to understand a client's attitude to risk, such a basic approach lacks the flexibility needed to assess a longer-term outlook and distinguish this from the client's fear of short-term volatility.
Another very important point to consider when weighing up the advantages of a specialist portfolio planning tool against the paper-based method, is the fact that even for advisers who are truly expert at gauging risk, matching an appropriate portfolio to the risk is a completely different matter.
Whilst it is relatively easy to measure and record a client's general attitude to risk, justifying why the chosen portfolio is appropriate for the client can be incredibly hard. Fortunately, portfolio planners can help take away this burden, illustrating both the potential upside and downside of different portfolios so the adviser can decide whether it matches the risk levels indicated.
In conjunction with consulting actuaries, Tillinghast-Towers Perrin, Standard Life developed its own portfolio planner. Instead of the standard questionnaire route to assessing risk, the planner uses a stochastic investment model to forecast how different strategies would affect a clients' fund.
Even on a purely intuitive basis, not many advisers would argue with the fact that asset allocation makes good sense. Individual stocks in the same asset class tend to be highly correlated and tend to move together but it is the behaviour of the asset class as a whole that makes the difference. Different types of assets behave in quite different ways and the right investment mix depends on the ability to withstand market volatility, investment timeframe and investment goals. Portfolio planning tools provide a vital role in helping advisers cover all of these areas.
Wealth Management Tools
One of the reasons that advisers use online tools is to help to demonstrate to both the regulator and clients themselves that best advice has been given. When it comes to wealth management, advisers who combine their professional skill, judgement and experience, with the online tools can present facts and figures to their client's in a clear and meaningful manner.
Most wealth management tools come as com-ponent parts of larger systems but with the growth in this area, there are an increasing number of new 'stand-alone' tools coming to the adviser marketplace. Clearly, these are quite sophisticated and rarely provided for nothing, but if your firm's expertise is holistic planning, the case to invest could be particularly strong.
By adopting wealth management tools that can share data with an adviser's back office software system, even greater efficiencies can be achieved through less re-keying of data. High quality client reports can be generated that include automated valuations with all the information seamlessly stored in one audit trail.
Perhaps one of the most popular new breeds of tools in the past year has been that of the 'aggregation' tool. Both Prudential and Standard Life launched their own versions with positive feedback from advisers.
The new 'Client View' service on Standard Life's extranet, www.adviserzone.com. replaced the previous 'client and policy servicing' functionality with a much broader online valuation service, which includes Sipps and mutual funds. By entering a client's name or National Insurance number, advisers can see an aggregated view of all their clients' Standard Life policies in one window.
Focusing on Sipps, Client View provides a range of client information including fund valuations, investment instructions, cash transactions as well as the latest updated value of other investments such as property, or stocks and shares. The service uses real-time data and a combination of monthly and quarterly fund reports provided by Morningstar. Non-Standard Life assets, such as commercial property can be manually input into a client's Sipp portfolio through the Standard Life Sipp Service Centre and can then be included in the overall valuation in Client View.
Integrated Regulatory Reporting (IRR) is the approach to regulatory reporting which was introduced following the FSA's 2003/2004 Plan and Budget commitment to streamline the existing (mainly paper-based) reporting requirements for adviser firms. On the FSA website are a whole variety of support and information tools designed to help advisers become more familiar with this new regulatory process.
'Firms Online - Regulatory Transactions' is the name given to the new FSA internet-based service that was designed to 'make it easier for advisers to send timely and accurate information' and particularly easier for the FSA to validate and analyse it. The FSA requested that all advisers should start to collect the required information for online reporting from April 2005 - in preparation for the first electronic submissions which took place from July 2005. Timing varies for each firm dependent on its Accountancy Reference Date, but the use of the online service is mandatory and failure to submit returns on time can result in fines or more severe penalties.
While advisers have never had as much choice on which tools to use, they have also never had as much need to use the available tools. Whether it is pressure from regulatory reporting, compliance or simply improving customer service and increasing operational efficiencies the tools of the trade are becoming increasingly important to advisers.
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