Where you sit in the Financial Services supply chain will affect your perspective of whether you have the same, similar or different issues when looking at some of the key challenges set out in last week’s blog.

For the many Providers, in an increasingly global market, they would probably like to exploit synergies in product manufacturing and operations. Whether they could design a set of product ‘chassis’ may be debatable but parochial regional interests can get in the way even if it were possible. Many see the aspiration of a common, consistent technology infrastructure as a ‘pipe dream’ but Providers are going to have to re-examine what is possible and acceptable. Developing, maintaining and servicing products on legacy technology is expensive and time consuming. To compete in the future speed to market is going to be critical, as is the ability to adapt to the different needs of consumers along with the capability to change products and services based on customer feedback, along with emerging trends and opportunities.

In the past, many products have been too complex and so taken more development effort, time, money and ongoing service than was necessary for many of the customers. However, with little or no ‘experiential’ data or feedback, providers continued in blissful ignorance. Indeed, it could be argued (as the FSA would do so) that Providers used commission to ensure that they achieved sales of poor products. Many IT systems are a constraint to innovation and speed to market and whilst there is always a concern about what technology alternative to choose, a failure to act and not do so with knowledge and speed, is a certain recipe for future failure. Providers have wanted to ‘own’ their IT operations and so many have IT departments that are bigger than technology companies. Some have ‘outsourced’ their operations, but this is disguising rather than solving the problem. The world has moved on and more and more businesses are looking to adopt a SaaS strategy.

With the effect changing remuneration from ‘Provider determined’ commission payment outlined in the RDR, Providers are going to have to look very hard at the operational costs of their business. Products will have to be price and feature competitive, as well as being able to offer a quality service. How they choose to distribute products will also be a key issue. There is real a danger that the ‘commoditisation’ of products could leave many unable to compete in an Adviser (IFA) only route. Do they aim to be in a niche and if so which one? Do they operate a tied/multi-tied model or work on a ‘direct to consumer’ model. Each of these has different product, remuneration servicing implications. There is little doubt that the next few years will see some significant consolidation and it is likely to the strategically strong innovators that survive.

When looking at the analogy of car manufacturing, do Providers aim to have an entry level model such as the Tata Nano for one market segment and separate ‘luxury’ marque such as the Jaguar for the better off? Taking this analogy back to how Ford created their product development and we could see an underlying chassis and certain ‘parts’ such as on the Mondeo being used with the jaguar X-Type brand. Common architecture and component re-use should be sought and exploited where possible. A ‘Wrap’ or ‘offset’ concept may also be worth exploring; it may be a degree of ‘snob value’ but if all those who say they are going to concentrate on the ‘Wealth Management’ space, it will be very crowded and very competitive! The mass market can still be served profitably, it will require a different approach to product development and distribution. A simple, low cost product that can be easily understood and bought, may not meet the ‘ideal’ of some untopians (including FSA personnel), but if it is possible to ‘upgrade’ or ‘trade-up’ – perhaps with advice, the objective of getting from A to B may well be better served by a ‘Tata Nano’ than not getting from A to B at all.

In next week’s final instalment, I shall wrap-up with some distributor views.

The world is changing and never more so or more quickly, than it is today. Financial crisis aside, what are the challenges that the industry faces over the next five years?

Well, here are a few that I am sure most people would recognise and agree will and should be part of current strategic thinking:

• Globalisation and geographic reorientation
• Consolidation
• Life extension and health improvement
• Consumer attitudes to risk and financial strength
• The needs of ‘Generation Y’ consumers and their role as employees
• Governance and regulatory change
• Nimbleness and speed to market
• Understanding the customer [and the consumer!] – who they are and what they want
• Information access and communication – on-demand (anytime, anywhere, any device)
• Competitive differentiation in an increasingly commoditised market
• Cost reduction and bottom line improvement
• Service

• And of course technology!
– Analytics & optimisation (IBM has invested heavily in this area with ‘Stream’ computing –instant data pattern identification – that seems to ‘leapfrog’ Data-Mining)
– CEM – Customer Experience management
– SaaS – Software as a Service (listen to the mantra from Salesforce.com – NO SOFTWARE!)
– SOA – Service oriented architecture
– Web 2.0 [3.0?]
– Mashing – combining different functionality from different applications to create a new/different application (usually delivered though the browser)
– Genome and bio technology

So what does this mean? Well, in next week’s blog, I will look at some of these pressures from a Product Provider perspective…

We’ve been talking about it for a long time, but perhaps technology is finally maturing to help the messy and time consuming process of collecting client information at the point of business.

I’ve just changed my central heating boiler service company and was recently impressed by the sort of technology the engineer was using – he was able to describe my boiler in detail from the definitive manufacturer’s manuals, show me a couple of pieces of guidance from the local building regulations and then take me through the sign-up process of the initial inspection. Once I was happy with the information, I was able to sign on the forms we were discussing, as was he.

Now, the sort of technology was not new, a Toshiba Tablet PC running Microsoft Windows XP Tablet Edition, but I wondered why this approach has not got further within Financial Services, although a number of solutions’ suppliers have tinkered with it over the past few years without much success.

Devices that support gestures, technically known as haptics, are pretty common now – from Apple iPhones to touch-screen kiosks, they’re in wide use – what they don’t seem to be used for within our industry is easing the complex data capture processes needed for activities like fact finds, application forms etc.

With companies like Microsoft investing significant sums in activities such as Windows 7 Touch, then hopefully the solution providers will be able to move towards a more natural and robust way of data collection. One of the most significant barriers our clients continue to describe is the way that technology obstructs the client interview process – the opinion normally revolves around the way in which keyboard and screen interaction interferes with eye-to-eye interaction with the client.

With the use of a more natural interaction with the technology, through pointing, fingers and pens, similar to the approach I describe in another industry, then I’m convinced the use of technology at the point of data collection could be increased, thus enabling one-touch processing of the data, true straight-through-processing and reduced costs for everyone involved in the acqusition of new business.