Advisers seldom consider the role of third-party administrators, but they have a profound effect on the market. Stuart Ward explains.
Selecting a product and provider for a client is the start of a relationship that will last for many years, so you need to be confident that when you choose a particular protection plan, or invest in a fund, that the provider is committed to delivering an outstanding and ongoing service.
For many providers, this is where a third-party administrator (TPA) comes into the picture. There is every chance that when they call a provider to set up a plan, make changes or to request a report for your client that they will be talking directly to a TPA. The TPA takes on some, or even all, of the back-office administration for the provider, delivering the ‘service promise' that the adviser has made to their client.
The TPA will answer the call and respond to their correspondence in the name of the provider. The best TPAs will provide a seamless service, invisible to advisers and their clients, but ensuring they receive an efficient and highly personalised service.
So, what are the advantages for product providers in using a TPA and how does this help you in serving your clients? TPAs come in all shapes and sizes, ranging from global businesses to specialist niche operations. The behemoths usually provide very high volume ‘plain vanilla' servicing for mass-market products, while the specialists can provide specialist added-value services.
In all cases, however, the level of the service provided will depend on the TPA's contractual agreement with the product provider. The quality of service delivery is a real differentiator and is dependent on the TPA's system capabilities, the knowledge of its staff, service levels and overall professionalism.
At their best and working with a well-considered remit from the product provider, specialist TPAs can enhance the service advisers can provide to clients. So let's look at how TPAs work and some of the services they offer.
Administration efficiency
Most product providers are actuarial, technical and marketing experts. They follow developments in the market and continuously look for innovative ideas that can be developed into exciting new products. Administering the product may not be the provider's primary business aim or core competency.
Specialist TPAs, on the other hand are passionate about providing efficient, world-class administration and customer service. They are also usually contractually incentivised to meet very high levels of service responsiveness and quality.
As the TPA is set up to deliver operational efficiency, they can usually administer products at a lower cost than the provider, and to a higher standard. These savings can be passed on to clients through lower premium rates and charges.
Developing client relationships
We know that at certain times clients want to make changes to their plans without contacting the adviser first. This can be particularly true where a plan has been in place for some time and the client has lost sight of its benefits and value.
The best TPAs offer customer retention strategies that can help to ensure customers who are considering cancelling their policy are aware of all their options and what the product does for them so that the customer can make an informed choice.
For example, subject to the wishes of the product provider and in some cases the IFA, the TPA call centre staff may be able to offer an alternative plan, or refer the client back to you for further advice.
Enhance customer experience
Specialist TPAs often offer technology options that providers frequently cannot, such as online self servicing of clients' plans. IFAs often regard this as an important added value service, because it reduces the time you need to spend on routine administration of accounts, such as changes of address and bank details, thereby releasing more of your time to provide high-quality advice.
TPAs can often include online self-servicing capabilities into the specification for low volume, niche products where the investment needed by the provider would be too high relative to the likely return.
Specialist TPAs can also reverse engineer online self-servicing into long-standing products and those no longer open to new business, where online capabilities were not part of the original product spec.
With consumers increasingly demanding online access on PC, smartphones and tablets, the ability to offer online self servicing is rapidly becoming a ‘hygiene factor' for advisers and their clients, rather than a ‘nice-to-have'.
