We can segment the IFA market in different ways, but today we will consider advisers who deal primarily with companies and pension schemes as opposed to those who deal primarily with individuals.
For the latter group, planning and asset allocation technology has made a big difference, with over half of advisers now using asset allocation technology, and every major insurer bar one making such tools available via their platform.
However, the former group has been the subject of much lesser focus – which is ironic when you consider the needs of the Group Pensions marketplace.
As some readers may remember, pre-stakeholder, the Group Pensions marketplace was a buoyant place.
The rewards available could easily justify the costs of sending a fully qualified adviser out to see all of the prospective members of a scheme to talk through the benefits of joining with the result that joiner rates of 80% or more were quite achievable, depending upon the scheme and the workforce.
Post stakeholder, this has changed, with falling revenues and commentators such as Ned Cazalet in his influential work Polly Put the Kettle On implying that commission rates are still too high.
With smaller margins for communications, joiner rates have fallen, especially in smaller schemes. In the medium sized market, various mechanisms such as the lower cost non regulated advisers have been tried, but even the use of these individuals is under cost pressure. Simplified joining is another solution however European law has restricted its use in some forms.
Asset Allocation and Planning technology can provide a significant part of the answer here, as it can answer members’ questions at a time convenient to them, and at extremely low cost per member.
In particular, this type of technology can put scheme membership and communications in the context of employee’s own retirement plans, and technology based tools can easily be branded as the employer’s, and accessed via an intranet if one exists.
Moreover, the often younger audience amongst whom joiner rates are particularly poor tend to be computer literate web users.
So where does this leave advisers, if all this work is being done by the provider. Actually, there are a number of more high value added areas such as advising the scheme investment and communications strategy on which advisers can focus, taking a leaf out of the EBC’s book in the medium and large scheme market.
Simon Farrant is head of financial planning at Distribution Technology
The views expressed in this article are those of its author and do not necessarily represent those of the company he represents, IFAonline or any other Incisive Media affiliated organisation.IFAonline
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