Advisers are becoming increasingly dependent on e-services, helping them to meet their clients' objectives, says Alison Everett, e-business marketing manager for Skandia, and to justify an annual fee for their services
The first five years of the 21st century have seen a massive growth in the e-services available to support the advisory process. Even now, when you may think we are reaching the crest of the wave of adoption of these services, more than 81% of advisers say their dependency will increase.
Nearly 50% of advisers now rate e-business as being just as important in their choice of product provider as product features, charges, documentation, commission and customer service. And with recent studies showing 80% of advisers have broadband internet connections, this is surely going to be a factor that becomes increasingly important.
These figures are confirmed by usage levels at Skandia, where we see nearly 10,000 individual users from adviser firms logging on each month to enact well over a million valuations annually. Extra to that, more than half of all Skandia's switch instructions are completed online.
With such increases in online traffic, it is also likely that as advisers' knowledge and use of technology increases they expect much higher sophistication in the tools providers offer. Having moved on from the early day services such as policy valuations, advisers can now obtain access to online applications, policy tracking, commissions, literature libraries, fund switching, portfolio planning tools, client risk profiling, online calculators and consolidated views of clients' holdings.
With fund selection playing such an important part in the advice process, it is little wonder the latest additions to provider sites are a wide range of portfolio planning tools.
Skandia's software can take the client through a series of risk profiling questions that will ascertain their attitude to risk. The risk profile can then be used in conjunction with a number of different methods of asset allocation modelling. Advisers can choose from a 'do-it-yourself', pick your own sectors approach, Lipper Asset Analysis models or Optimised Portfolio modelling.
Lipper portfolio models provide investment managers with a monthly peer survey, covering in excess of 2,800 life, pension and mutual funds, where their asset mix and geographical allocations are detailed.
Optimised portfolios have been designed to be appropriate for investors with a certain attitude to risk and for specific investment periods. The portfolios were derived using an adapted version of the standard efficient frontier methodology and Tillinghast Towers Perrin's Global CAP:Link asset model.
It is important to make sure that if the core models are updated then the adviser is alerted to the fact and offered the choice of amending his portfolio to bring it into line with the revised asset allocation.
Once in possession of an asset allocation that meets the client's requirements, there needs to be a rich seam of fund information available at the adviser's finger tips. This not only needs to be comprehensive in its coverage, as well as being up to date, but it must also be easily sliced and diced by a series of filters the adviser can choose in order to whittle down the universe of available funds.
Only once this is done can the intermediary come up with his shortlist and final recommendations. Of course, the whole process must be backed up by a full audit trail, which can be produced quickly to complement the adviser's report to his client.
However, the advice process does not stop at the sale any more, the emphasis on ongoing advice and regular review means advisers need to be able to analyse their clients' existing portfolios efficiently. Having reports available that analyse the underlying assets of a client's portfolio, highlighting the current asset allocation, performance, volatility, portfolio risk profile and stock overlaps is extremely important. If an adviser can identify his client and obtain an asset analysis report, together with a consolidated valuation statement, he has all the ingredients for a full detailed review pack.
The client review will undoubtedly result in alterations to the portfolio, so tools such as fund switching or rebalancing help the adviser to make those changes quickly.
In some circumstances, advisers are choosing to manage their clients on a more wholesale basis. Using their skills in investment management they produce a set of standard portfolios - for example, Balanced, Cautious and Aggressive in the most simple scenario.
Intermediaries can then manage these going forward, putting all their concentration into defining a small range of portfolios, rather than trying to cope with bespoke portfolios for all their clients. Advisers with access to tools that allow them to link their clients to the relevant portfolio, with any changes made at portfolio level filtering through to the client's plans, makes the management of these portfolios quick and efficient.
Portfolio planning tools provide a wealth of fund information, available at the adviser's finger tips. An online service can ensure this is comprehensive in its coverage and always up to date. The processes that advisers then go through, and which are outlined in this article, are even more vital in the Sandler world where intermediaries will have to prove they are constantly reviewing their advice to ensure the clients' objectives line up with their investment portfolio, thus justifying why an annual fee should be paid for this guidance and advice.
Partner Insight: For Blackfinch, the arrival of its IHT portfolio services was a 'natural evolution' in the group's offering and points to an established track record of returning cash to investors.
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