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.

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.

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.

The two stories were remarkably similar and neither moved to fees to pre-empt RDR, in fact RDR was almost irrelevant to their decision. Both believed passionately that fee based services were the way forward for the benefit of their customers and their own businesses. They had taken a little time to establish exactly how to achieve this, but once they had invested time to indentify and clearly articulate their business proposition, they hit the streets with their new models and haven’t looked backwards since.

That makes the transition sound easier than it undoubtedly was. For one of the IFA firms, they started with a client bank of 4,500 and found only 10 of those would transition to a fee based model. How scary is that? The client bank that they had grown and nurtured for 10 years was effectively going to have to be rebuilt – virtually from scratch! However, they did it and at the end of year one of operating their new model they had grown revenue by 85%!

With RDR coming around, you may think these companies are sitting there looking pretty smug – ready for the changes. However, regulatory change was never the key driver in the first place – good customer service and keeping ahead of the game was the motivation and these firms are now looking at what to do next to stay at the forefront of the market with a service based value proposition.

Neither of these firms is large, they are not owned by large product providers, or heavily capitalised. However, as with many IFAs, these companies are resilient, resourceful, focused and driven. As a result, they will undoubtedly survive the difficult conditions the financial services market is currently facing. A fear of failure is causing some to bury their head in the sand and hope these issues will go away. Those facing a similar dilemma should not be afraid to ask for help and as these companies have shown, it is not only possible, it has proven to be more beneficial than trying to maintain the status quo.

Cost effective supply chain management
> Still very cumbersome and paper based

Security
> Information and data needs to be protected
> Criminals are exploiting technology more than the insurers are

Risk awareness, implications and management
> Climate change, disasters, terrorism, crime and pandemics

Social networking
> Access to between half a billion to a billion people
> Exploit web2 technologies

Global marketplace
> Emerging markets are not just open to physical presence, but technology potentially means we have a ‘borderless’ world
> Legislation, regulation, political and cultural barriers may be put up as economic hurdles

Improvements in health and mortality
> We can predict the health and longevity of people fare better than ever before
> Technology improvements in prediction may not be fully utilised [but is it a matter of time?]
> Predictive capability of health and mortality of individuals could be used to focus on problem management and mitigation
> Science, technology, biology and pharmaceutical developments extend quality and longevity
> Providers could tailor product terms to benefit individuals (Annuity products already have tailored benefits for ‘impaired lives’)
> There is a significant social and political hurdle to overcome

Taking the last bullet point into more detail:

The life insurance industry is obviously facing a number of challenges in the current market environment. One of the potential future opportunities and key drivers for the industry is going to be life extension. We are rapidly approaching a time when we can begin to more accurately predict and improve people’s longevity through a combination of pharmaceuticals, life style management and eventually even medical devices. Individually personalised medicine is emerging, indeed if we look at the US as an indication of future trends, the consumer genomics marketplace is an increasing opportunity. Genomic information could be used to predict and promote health and life. With the pace of change accelerating, we are living in an era where people will be living dramatically longer than ever before and the quality of their life will be much better. There are significant social, political and economic implications that could affect what we have to do and what we choose to do with that extended and improved quality of life. Will we have the income and or capital to fund this extended future? Will we want to or need to work longer? If we live longer, will we need long term care? Will we end up with a society like that portrayed in the motion picture Gattaca?

Improvements in medical science will not stand still. Killers such as cancer and heart disease are and will increasingly be brought under control. Companies like 23andMe are offering to sequence your personal genome and analyse it against thousands of genetic tests for disease. While there is an argument about whether it is acceptable to use the potential new sources of knowledge such as genetic profiling to underwrite products, this argument has been focused on the ‘negative’ implications of insurability (or more particularly ‘uninsurability’!).

However, if and when people begin to start taking advantage of this technology, insurers will have the possibility to map that to different kinds of new insurance products tailored to individual circumstances. There is already a trend by some insurers towards creating products targeted at people who ‘live a healthier lifestyle’ and whilst this is currently a pretty crude judgement of health and longevity, if people eventually choose to access genetic knowledge, they will be likely to want to capitalise on ‘good news’ and be better able to manage and mitigate the ‘bad news’ through healthcare improvements.

With the problems of today being at the forefront of the minds of managers, it is likely that they will be analysing their businesses with a microscope. However, whilst this is important, they should not ignore to also use a telescope to ensure that they have a clear view of what the future may hold too.

As for the exhibitors the numbers were also reduced substantially and the big prominent stands of the past were distinctly lacking. Gone were all the sub prime lenders that had entertained us in the past, even the traditional lenders were reduced in numbers.  Gone were the alcohol based stands, the computer games, walk in buses and chocolate fountains replaced by bowls of chocolates, bananas and free packets of mints.

The exhibitors were now made up of Software companies, Surveyors, Networks, Publications and Insurance companies – indeed of the 79 exhibitors listed in the exhibition guide, only 6 of these were lenders.  These remaining exhibitors have benefited and had clearly got increased stand size for reduced fees.  Some companies used to tiny stands said their stands had been increased in size 3 times by the organisers at no additional cost.  However given the drop in footfall in the exhibition itself this will have been of small consolation.

Let’s hope the market upturn happens quickly and next year things are back to normal.

If we look at the global credit crisis, or as it is now becoming, the global economic crisis, we can see governments, leaders and the business community generally trying to find solutions and to do so quickly. There is no doubt that they will look at ‘past performance’ of previous recessions and crisis to see if there is anything that they can use from those experiences to fix the problems of today. However, as quickly as they come up with one answer, they are either finding that they need to change it or add to it. This should not be a surprise because the circumstances today (PEST) are different, as are the interdependencies and consequential ‘knock-on’ implications.

For example, China announced a major investment of $586 billion in trying to underpin/stimulate its own economy and those it relies upon (although it is unclear how much is ‘new’ money). The US has just decided not to use the $750 billion originally approved by Congress for Treasury to use to buy up ‘toxic’ dept securities (Troubled Asset Relief Program, or TARP) from the banks and is instead now planning for the Federal Reserve to create a new special-purpose lending entity, which would lend cash to investors or companies that put up collateral in the form of consumer loans. The Fed might lend up to 80 percent of the value of those loans, providing a cushion for taxpayers against losses.

The Treasury claim that they would only contribute 5% to 10% of the money to finance the lending. But the Fed would raise most of the money by selling what is known as nonrecourse commercial paper (Promissory Notes) to investors. So in theory, the plan would allow them to leverage the government’s money by as much as 20 to 1, meaning that the Treasury would provide 5% of the money and investors would provide 95%. Using $50 billion in money from the government rescue program, they said, could thus underwrite $1 trillion worth of lending for consumer loans. However, this highly leveraged idea is not without its detractors who are concerned that the taxpayers are indirectly carrying the risk for the whole amount!

Terms like ‘desperate times need desperate measures’ are being bandied around in many circles and our natural instincts are to ‘batten down the hatches’ whilst this storm (or series of storms) blows over. However, there is a real fear that the risk of being ‘risk averse’ will undermine or negate the attempts by governments throughout the world to adopt Keynesian principles and pump money into the system to keep it going. The UK govt, like the US is becoming frustrated with the apparent reticence of the banks to use the ‘bailout’ funds they have been given to help increase the flow of lending into the wider economy. Indeed, there are some who are accusing the banks of exacerbating the pressure on businesses, so increasing the risk of failures and consequential redundancies. The answers are not easy, but if we don’t try and think outside the box when looking for solutions, we will not progress. In times or war and crisis, it is the application of intellect, thought leadership and innovation that achieves the most success. We believe that those who adopt this approach with an active rather than a passive strategy will survive and prosper.

In my own industry of IT, I have had my past non exec directors telling me that we could get the same development resource for the equivalent of a ‘headline grabbing’ £50 per day! My associated industry of Financial Services has been a major exponent of outsourcing for many years and I am sure that despite the claims of looking at the bigger picture’, they too have been focused [seduced] on the claimed cost savings – in their case, multiple millions!

From my own, albeit limited, experience of investigating outsourcing, I suggest that there are a number of other factors that should have been of greater priority. At the time I did my own evaluation, I framed the factors as the three ‘C’s – Competence, Capacity and Cost. These and the order of priority may and should sound obvious, but based on some of the past decisions; I am not convinced that they are. With hindsight, I would now add a few more ‘C’s – Culture and Consequence reinforced by Commonsense!

What is the potential ‘Competence’ that you are looking to outsource? I know organisations will say that they would never outsource areas that are their ‘core competencies’, but who decides on the distinction between core and non core? Even where there are ‘fringe’ activities, companies should be careful not to dismiss what competence is being delivered and the potential effect of change. Call centre outsourcing is one of those personal irritants for me and it is interesting to see that companies are bringing this back in-house/in-territory. Amongst the competencies that can be lost is the ability to ‘get context’, a failure to convey ‘empathy’ and even sympathy. This is not a judgement of being able to speak the language nor of race – indeed it has been said of we and America, that we are ‘two great nations divided by a common language’… The point is to not just think of the competence as being able to take a call and process an enquiry or query. ‘Dealing with people’ is more than a process, and a failure to do it well can damage the company beyond the headline savings on a spreadsheet used to justify the outsource decision.

An area of outsourcing that I have more sympathy with is that of pure predefined process handling [production line], where it is largely a mechanical series of tasks [workflow] with a limit on the need for inter personal skills or cultural contextual understanding. That having been said, before a decision to outsource is considered, a company should look at the processes it has in place to see whether these can be improved to be more effective and efficient (for example using Six Sigma or Lean). In the Financial Services industry a number of companies have literally outsourced ‘legacy’ processes at a cheaper price. Whilst there is a bottom line improvement, this is a short term gain in that the outsourced cost saving takes away the pressure to adapt and improve. It is often not in the interests of the recipient outsource organisation to improve these inefficient processes themselves because they have been paid to do things a certain way and/or on a per ‘seat basis’ [at a lower daily rate].

Ultimately, the assessment of what to do requires a truly objective approach and needs to model the outcomes and implications in the short and long term.

However, many years ago I heard a story about a simple idea that I believe is very effective. Like many people, I keep a ‘to do’ list of tasks and actions etc. I had been doing this with reasonable affect for some time and was generally good at getting through them. One day, I heard of a senior American executive being advised to put a priority number against each item each day. And that the tasks are then tackled in the priority order. Surely the act of numbering was only what we do subconsciously anyway!? What I found, was that it was more difficult than I thought to stick to the priority of doing the important things first, largely because they were usually the most difficult and most challenging. That having been said, it really does work. I have a 1 – 3 grading [1 being highest], that IF I follow it, it does make me more effective. As a consequence, it does mean that I close most weeks with a bunch of priority 3 tasks unresolved and I occasionally make a point of turning them into priority 1’s just to clear them, or drop them off the list.

I have heard of other people who have far more sophisticated methods, but as Sir John Harvey Jones once said about strategy, the most effect are the ones that you can use! So this is a simple idea and though not always the easy, it is an effective and useful tool.

As Einstein once said, “you cannot solve current problems with current thinking… current problems are the result of current thinking”. Our own experience has shown that some users will proliferate bloated and inefficient processes into the new solution because that is what they either created or have become most familiar with. It is important for customers to look at the methods and people they use to develop the most effective and efficient solution design that uses the true capability of the technology that is available. Don’t just ask what you currently do, ask why something is done a certain way, what doesn’t need to be done and what you can be done a different way. If solutions are architected and designed properly, it is possible to allow end customers to access and complete parts of a factfind as well as have remote interaction with the adviser or para-planner. Systems can allow secure access to policy information and investment performance too. All of which optimise the potential benefits of technology and can be used to improve the dynamics of the customer relationship.

In addition to using practical ‘common sense’, it can help to look at some of the elements of methodologies such as Six Sigma or Lean Process reviews to identify where the business process and end customer experience can be improved along with time and cost savings. If existing user experts are used, they should be matched by people who can act as an independent challenge and to help facilitate ‘out of the box’ thinking.

Changing technology solutions can be a significant investment that will deliver big benefits. However, it is only part of the story as it can also be an opportunity and catalyst for genuine business process improvement and technology suppliers should be encouraging their customers to invest in obtaining benefits from both opportunities.