Guided sales will pose a threat to independent financial advisers if the proposals in the Retail Distribution Review (RDR) are given the green light, life companies warn.
A study conducted by Focus Solution, published today, suggests more than eight in ten providers believe the concept, a product of the FSA’s bid to split sales and advice, could hit IFA profits.
Guided sales refers to those instances where customers participate in a “non-advised” process with the provider which may lead to some choosing to buy a product.
The Focus Solutions study, called Focus Quotients and based on results gathered throughout 2007, also found life companies believe the RDR will bring about the end of the commission-only adviser.
It suggests life and pensions providers feel most IFAs will move to a fee-based model and have no alternative but to embrace wraps in a bid to enhance client service and retention.
Richard Stevenson, chief executive of the Focus Solutions Group, says: “The underlying message that we took from this year’s study is that the distribution landscape is most definitely changing.
“The FSA’s RDR proposals are forcing providers to review their distribution strategies in terms of the wrap market, incorporating guided sales, and how they best service the IFA community.”
The study also shows one in four life companies has upped its technology budget in anticipation of the RDR.
The report, based on results from 2007, underlines the “critical role of technology to support a changing distribution landscape”, it concludes.
In addition, the study suggests 40% of life and pension providers are receiving over half of their business electronically with an overall industry average of one in every 2.6 transactions now being submitted electronically.
“Electronic trading is recognised today as a ‘must’ rather than an option for providers as it was when we produced the first Quotient back in 2000,” Stevenson adds.
“Those providers that still haven’t embraced ecommerce will simply not survive in the new regulatory world.
“What we are experiencing today is a number of the major and specialist providers refreshing and consolidating their entire extranet frameworks to enable products to be launched at a fraction of the associated time and cost.
“These frameworks can easily be flexed to support multiple distribution channels or partners from a single technology platform.”
Submitting business electronically via the provider’s intermediary extranet still remains the most dominant method of submitting e-new business by volume, the study found, closely followed by the industry portals.
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