The economic downturn forced consumers to take a closer look at financial wellbeing. It is now easier for consumers to take this in hand, all be it with the help of opera singers and meerkats, Sean Casey discusses how this trend affects advisers and the technology that revolutionises their work
Over recent years, there has been much emphasis placed upon the health insurance and protection market, with many advisers turning to products such as ASU, income protection and critical illness cover as a means of generating new business opportunities. This, during a time where investment markets took a noticeable knock in consumer confidence and new mortgage sales hit rock bottom.
With articles, news summaries and even social networking sites focusing on the woes of living through a recession, it is understandable that many consumers have begun to take a closer look at their own financial wellbeing, which in turn has led them to one of two places: advisers’ doors or comparison websites.
Throughout the economic downturn, comparison websites have increased in popularity – according to the BBC, as of December 2008 the comparison site market was estimated to be worth more than £1bn a year, with more than six million people visiting price comparison websites every month.
This has raised concerns relating to unadvised sales and links to unsuccessful claims, sometimes resulting in FSA complaints. (On top of this, such sites have induced a wave of criticism directed towards opera singers, small mammals and other tiresome advertising mascots). Chasing the cheapest policy has inevitably clouded some consumers’ judgment as they have failed to recognise the limitations of the cover they have in place.
So, is the cheapest best? Unfortunately, the most likely answer is ‘no’ for almost everything. The cheapest is often however, the path of least resistance for consumers.
For example, if one critical illness policy is priced with a monthly premium of £15 and another £25, a consumer may wonder why they would need to spend £120 per year more than they have to. At this point, it is down to the adviser to explain what cover is included under each plan to help the consumer understand the benefits to make an informed decision. Unfortunately, comparison websites cannot articulate the differences in quality of cover to the same level.
Adviser charging
Following the Retail Distribution Review, adviser charging has been introduced as a solution to commission-distorted financial advice. The release of a separate consultation paper for protection products, however, may bring with it a new set of challenges to non-protection advisers recommending protection products. With adviser charging and greater commission transparency, protection plans may become less profitable to transact for advisers. Making new business transactions quicker and easier, therefore, is a way of offsetting this potential reduction.
Whether or not the experience of recent years can be used to encourage further advised protection sales remains to be seen now we are officially out of recession. However, technology to help advisers fulfil their duties is ever improving in a competitive market place. The ways in which advisers are using available technology is also increasing as many intermediaries move into the digital age of advice.
Protection advice has come a long way from a time when advisers were required to laboriously trawl through product literature, send and receive life quotes and applications in the post and make numerous phone calls to arrange cover.
Advisers now have a wealth of resources at their disposal to make writing and recommending protection easier and more efficient. Online product research applications, quotes portals, provider extranets, IFA forums and blogs are all methods of researching, selecting and writing suitable protection for clients.
Adopting an electronic new business process and utilising the vast array of resources available can not only save advisers time and money but can also enable them to enhance their service offering to clients and generate leads.
The internet has revolutionised the way in which we do almost everything – including buying and selling financial services products and networking.
Advisers are able to gather information from a wide variety of sources to enable them to keep up to date with industry issues, find new products and discuss matters with their peers. The availability of information provided online through sites such as IFAonline, Money Marketing, FT Adviser (and other intermediary websites offering email alerts) presents instant access to industry knowledge and updates for all financial markets.
Blogs, forums and social networking sites in particular have become surprising outlets for advisers to discuss a range of topics including legislative matters, industry news, and events.
the beauty of a tweet
Perhaps more importantly however, advisers and financial planners have understood opportunities presented by becoming ‘facebook-ers’ and ‘tweeters’ and are now incorporating social media into their marketing strategies. Sites like IFA Life have been created to help advisers to raise their online profile to attract new clients and make professional connections.
Consumer or adviser matching portals such as unbiased.co.uk and findafinancialadviser.co.uk are also very popular and act as a form of lead generation for advisers who embrace their existence.
Financial social media may, however, bring with it questions relating to compliance, so it is important that advisers understand the FSA’s stance on what is deemed appropriate.
If financial advisers are relatively new to embracing e-business, protection product providers are seasoned professionals. Over recent years, providers have invested heavily in providing e-commerce capabilities through their websites in order to encourage new business and this includes hosting a range of resources available to advisers.
Sales techniques, statistics, interactive product guides, lead generation ideas and online tools have been developed by providers to assist intermediaries in selling their products and to improve their profiles amongst the adviser community. Excellent examples come in the form of LV= income protection toolkit, Legal & General’s OLP Connect quotation service and Bupa’s Intercom information resource.
While this information can be valuable to an adviser, it should not be viewed in isolation. In depth detail of plan benefits and features are useful if accompanied by whole of market comparison, however, in order to find the most appropriate product available, advisers must take a closer look at the suitability of products for specific clients.
Adviser research tools have been available for over 15 years and a large proportion of advisers will have access to a research system of some kind. Some employ a combination of different software to enable them to better service their clients’ needs.
Most research tools or best advice systems – as they are sometimes known – are now purely online solutions, which allow advisers to enter specific criteria in order to select suitable products for their clients. They offer a host of functionality to demonstrate compliance duties including suitability report writing, product ranking and filtering to eliminate policies that do not match the needs of their clients.
One of the many advantages of using research tools is the capacity for advisers to show clients how their specific criteria has been used to reach a suitable recommendation. Whether this is through printed audit trails, research reports or by conducting research in front of their clients’ eyes, methodology can be shown to demonstrate that the contents of a clients’ fact find have been carefully considered during the advice process.
In doing this, research systems can help advisers to evidence their Treating Customers Fairly duty to the FSA by demonstrating two of the outcomes detailed in the initiative:
Where consumers receive advice, the advice is suitable and takes account of their circumstances.
Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
Another advantage of using these systems is the centralisation of vast quantities of data, allowing advisers to rapidly and accurately draw side-by-side comparisons of products across the whole market. The ability to compare financial strength ratings of providers to demonstrate due diligence is another popular attribute of research applications.
Financial strength is often referred to in relation to investment and retirement recommendations; however, according to market intelligence data from Capita Financial Software, in the wake of the economic downturn more advisers are comparing the financial strength of providers when conducting protection research.
Research conducted in Q1 2010 shows that 73% of advisers using Synaptic Research to recommend term assurance considered financial strength using AKG, S&P and Moody’s ratings or any combination of the three.
As well as research tools, quote and e-apply portals are often built-in to advisers’ processes to simplify the advice process by enabling them to obtain single or multiple real-time client quotations for consideration and ultimately to submit electronic, pre-populated applications.
one-stop-shops
More recently, software providers have begun to initiate cross platform integration offering one-stop-shops for intermediaries looking to research, quote and e-apply through one application, negating criticism of quotation portals for focusing solely on price and research systems not always including price comparison.
An example of this cross platform integration is Synaptic Protection Research (SPR), which re-launched earlier this year. SPR integrates Synaptic’s research capabilities with quote and e-apply functionality from Webline. The software enables advisers to simultaneously conduct benefit led research on price led products and is the first step towards software developments which fully integrate functionality from Capita Financial Software’s three core systems; Synaptic, Webline and Quay Software.
Providers keen to gain exposure to their product ranges embraced the chance to market their products through such e-commerce systems early on and most now have teams designed to look after third party distributors. In return, software providers are now able to utilise the wealth of behavioural data – generated by interrogating online usage statistics – by supplying this information back to providers for product development. Market insight and user behaviour analysis are powerful tools for providers to utilise.
As well as enabling advisers to easily obtain information to service their clients’ needs, online technology available can help to encourage and improve interaction between providers, intermediaries and consumers.
According to The Association of British Insurers, 69% of life and pensions business was sold through intermediaries in 2008, compared to 58% sold this way in 1998. The quantity of resources available to IFAs in the market today is a testament to the way in which advisers have embraced new techniques in order to improve efficiency of their daily practices.
While technology can never replace the experience, expertise and knowledge of advisers, it can go some way to assisting them in offering a level of service expected from the FSA and demanded by clients.
Sean Casey is a research analyst at Capita Financial Software
