Last week we hosted our Technology Roundtable sponsored by Sammedia. The topic under discussion was the use of technology by clients to manage their finances.

We were joined by Danny Wynn from L&G, Ross Dunlop at Standard Life, Ray Chinn of LV=, Phillip Brown of Partnership, Verona Smith of Cofunds, Adrian Bishop from Scottish Widows, David Greenall from Canada Life and Michael Free and Tessa Lee from Sammedia.

There was little debate as to the capacity for consumers to use the internet to manage their finances. The uptake of online banking, the success of the comparison sites and the popularity of sites such as Martin Lewis’s themoneyexpert.com all showed the consumer’s propensity to go online to manage their finances.

The debate instead focused on the ability of Product Providers and Distributors to take advantage of this propensity.

Much focus was given on the need to ensure services were relevant and desirable by the end consumers. MoneyInfo from Sammedia was held up as a positive example of keeping things relevant for the end consumer. It collates information from different bank accounts and investment vehicles to give an up to date net worth for the client with the ability to analyse their position further. It is created in an ‘Apple’ look and feel to give it a sexy shine.

Another key focus was the creation of new products for the online world rather than simply putting existing products onto the web. Partnership have achieved this and as a result their annuity application form is stripped down from 20 pages to just 10 yes/no answers. They have challenged the accepted norms and smashed them apart.

The re-engineering of solutions is not always possible and advice is always likely to exist and the role of advisers in the sales process is key. But advisers need to embrace the technology too and support the online world bringing clients back to face to face world as required. Solutions like Moneyextra.com can help with that if embraced by the adviser world. They can be tools that IFAs offer to their clients that keep them engaged and keep the adviser at top of mind so when they need help with the more difficult aspects of financial planning they get help from them, when they don’t need assistance they may still transact via the IFA but online on the IFAs site.

Technology has a big role to play in the sale and service of L&P products – those advisers and product providers that realise this and seize the initiate will prosper post 2012. I fear for those (and there are many) that don’t.

Although I have no direct evidence to support this feeling, I sense that the past interest and motivation of IFAs to move towards using Wraps has become less certain in recent months. There is no doubt that the number of Wrap providers in the UK has increased in response to past demand expectations and this has given advisers a wider choice, but most Platforms are still loss making and still have some way to go to extend the range of funds and services expected of them by the IFA community.

We are still waiting for the FSA to publish the results and conclusions from the Thematic review into the use of Platforms. However, with what has been written so far, there is likely to be a need for significant investment in extending the platform capability to ensure that they cover the whole market . The concern about whether one Platform can provide comprehensive and fair analysis of the market has already been expressed in CP09/18. As things stand, it would be difficult to see a single Platform meeting the expectations of the FSA. Indeed, the question may be what number and combination of choices would give this degree of coverage and how would and IFA manage such a combination to deliver the right customer outcome in a cost effective way. There would also be the challenge of how integration between any such combination and other Practice management technologies may work.

With RDR, the Provider backed Platforms will have to ensure and show that there is separation of influence between the use of the Platform and the sales of their products. As a result, the original motivation for the multi-million pounds of investment may be more difficult to justify – especially if the bigger investment and development is to expand the range of funds and investment vehicles, so diluting their own business volumes.

Some of the motivation of IFAs towards the use of Wrap has been to move their business models towards a fee – FUM – rather than commission basis. However, there remains some question over the ‘transparency’ of charging on Platforms, both for Advisers and for the Fund managers. Transparency will need to address ‘disclosure’ (clarity) objectives and also ensure that there is no Product Provider influence over remuneration – hence potentially reinforcing the need to separate the Product Provider and the Platform Provider relationship. One of the benefits of Wrap is that they typically require and show that there is an ongoing servicing relationship and this can help with fee justification. However, the FSA has already said the move of customers to Wrap alone should not be used as a means of increasing the costs to the end customer.

Some of the Platform providers have sought to incorporate a range of tools and services into the Platform. Some even had aspirations that their Platform would be a source of all an IFAs needs. But many of these tools potentially duplicate those tools that are available via Financial Planning, POS and Back-office providers. These cost money to provide and as we move forward, the need and justification for this investment will become challenged, especially in relation to the potentially stronger pressure to invest in ensuring they have wider market coverage.

The pressure to invest in wider coverage when Platforms are still loss making and facing greater competition is going to be a difficult balance. The Providers will be losing the ‘cross subsidisation’ argument for internal funding and some of the ‘Independent’ platforms may struggle to raise the investment capital. Ultimately, this may result in cross platform collaboration and/or M&A activity to effect consolidation. In the meantime, we await the publication of the FSA review and any proposed changes to how Platforms are to be regulated.

When AT8 formed 3 years ago we were often drawn into arguments about online systems versus offline systems. The truth was there was no one right approach as it depended upon the business model being supported. Today the argument has shifted subtly to whether SaaS (Software as a Service) solutions are suitable to today’s market or not.

To examine this argument further we first need to define SaaS solutions and to do this I turn to our old friend Wikipedia who state:

Software as a Service (SaaS, typically pronounced ‘sass’) is a model of software deployment whereby a provider licenses an application to customers for use as a service on demand. SaaS software vendors may host the application on their own web-servers or download the application to the consumer device, disabling it after use or after the on-demand contract expires.

In this definition it is important to note that this is not about online versus offline – both models can be supported in a SaaS environment (although it is usually online vendors that operate in this manner). It is also not about simply hosting solutions on behalf of vendors. It is licensing access to software as it is needed, scaling the usage (by users or transactions) as required.

The advantages of this approach can be substantial, especially when combined with an online philosophy. The end user doesn’t need to invest in servers and has reduced IT management overheads, the service and their associated costs can scale to their business requirements, the software is kept current and up to date, the business model is more cost effective to run, and so the list goes on.

There are more and more suppliers of SaaS solutions out there. Salesforce.com is one of the most notable brands but there are also several Insurance specialist brands including IntelliFlo, True Potential and Solution 4.

At AT8 we have also taken this philosophy in building our own office infrastructure. We use Salesforce.com for our contact management, our email services are run by 1&1, while our documents and managed and stored on a service called huddle. We don’t limit the approach to software and we also buy our telecoms in this manner using a virtual PBX from Voipfone. We don’t have the capacity or the desire to manage our own infrastructure especially as it is cost effective to get others to do this for us. It is in effect Infrastructure as a Service.

It is interesting to see that some third parties, such as the recently formed Cirrus ICT are now beginning to join all these different Infrastructures Services together as one package for distributors. They add to their offering an IT management service to help ensure that the services, especially those of a larger scale than our own, are smoothly implemented and provide a reliable an ongoing service.

As with the arguments we used to referee three years ago during the online vs offline debates, Online SaaS solutions will not be the right answer for everyone. Some, especially large Banks, will not want an external service to host the data, some may want offline access, others will simply get frustrated with the performance problems that can occasionally happen with these services. But SaaS is getting main stream support and should not be ruled out without careful consideration.