Publications

E-commerce Matters – Edition 5

This newsletter highlights some of the industry e-commerce activities over the past few months.

We have started a new series of articles for Professional Adviser. They are covering what we describe as Practice Management Solutions, which is a term that covers all aspects of an adviser’s business, ranging from the front-office right through to the links to insurers’ administration systems.

Plum
Swift
True Potential

with many more up coming in the next few weeks.

We took a look at Capita Financial Software’s Synaptic Comparator solution:

Capita Comparator

Sammedia Sponsored Tech Round Table
Part 1
Part 2

Video

We dabbled into the world of YouTube a few weeks back, and covered our very successful Sammedia sponsored Tech Round Table in a very brief video blog, in glorious 720p HD!

Anyway, it’s back to normal next week, with our unique insight on topics, trends and technology.

The key thing is to read the actual guidance note and not just rely on the opinions expressed in journalist chat forums (though they are sometimes interesting to read). Accordingly, we have put the link to the ABI document here – ABI HMRC Guidance to determine the VAT liability of a financial adviser’s remuneration.

In a nutshell, it would seem that if the service is specifically intended to be for advice, then VAT is charged on the cost of the service, whereas if the service is for ‘intermediary services’ – arranging the purchase of a product – then the service does not attract a VAT charge. All pretty clear then [?]… However, if the charge made to the customer is not specifically separated for one or other type of service, then the question is whether it is ‘predominantly’ one or the other, and this ‘predominance’ will determine whether the VAT that will be charged, or not, on the WHOLE AMOUNT. Mmm, this is where ‘interpretation’ could come in! The problem with interpretation is that it is open to interpretation… especially in the eyes of the VAT inspectors’ teams and they will not necessarily be consistent in that interpretation!

So, some advisers may seek to charge a common unspecified fee on the basis that they can apply their view of what the predominant intent was and they may never have an issue. However, some will ‘play it safe’ and separate the services and charge VAT on the advice portion and no advice on the product ‘intermediation/arrangement’ portion.

There are some that will latch onto the potentially discriminatory increased cost bias being linked to an IFA’s ‘predominant service’ being advice, whereas the ‘predominant service’ for tied advisers – especially Bancassurers – may well be ‘product intermediation/arrangement’ (potentially lower cost). I don’t see this as a potential ‘conspiracy theory’ but I am sure some will.

A couple of diagrams extracted from the ABI/HMR&C guidance note are shown below. However, it is important not to rely only on these for your interpretation of how to handle the issues of VAT charging. There are supporting notes and more detailed explanations that has not been extracted. The document is not an onerous read – ten pages – so we would encourage all our readers to look at it to ensure that they understand the issues first hand.

One clear market we can learn from is Australia.  The Australian market is in many ways more advanced than ours.  They have had superannuation for a number of years, forcing the general population to invest for retirement.  This had led to substantial assets under management so it is not a surprise that platforms and wrap solutions came to market there before the UK. Many of the technology companies that drive the platforms in Australia have now brought their technology to the UK and are underpinning the UK platforms.  FNZ for example now powers Elevate and Standard Life’s Wraps while GBST (formally Infocomp) powers Macquarie and Novia.

In our work in the UK we have spent considerable time looking at how the Platforms should integrate to the Practice management systems in the UK.  One Australian Professional, now operating in the UK, told me that it was the Practice Management Systems with a focus on the Front Office, providing ATR, Cashflow Planning tools, Asset Allocation tools that had thrived in Australia ‘Post Wrap’ while those focused on more traditional Back office functions like contract enquiry and commission reconciliation have suffered.

Another trend we picked up from a systems house in Australia and that perhaps we can learn from, is that the Wraps have largely been through the phase of trying to provide the whole suite of IT tools to the distributor and  moved back to their core business of fund administration.  The CRM and Sales tools moving very much off platform and back to the practice management systems.
Our focus hasn’t just been on Australia.  We have been taking a look at Financial Planning tools in Northern Europe.  In particular we have looked at Ortec who provide portfolio creation and monitoring software, using complex financial models to help match asset allocation to ATR and to review whether the investment strategies stay in line with the client’s goals.  Their approach appears differentiated to the UK systems and if anyone would like more information then we would be happy to provide an introduction.

We mustn’t forget the US.  A few of the leading US financial planning tools have been anglicised and are now operating in the UK.  Planlabs has been available in the UK through BMC for a while now and last year Voyant launched in the UK and is gaining good market traction already.  Voyant has a Web 2.0 approach with a strong Business to Consumer function that can work in collaboration with the IFA solution.
Looking overseas of course isn’t an exact science, their market drivers are different and systems will evolve with different prioritises, but it can give us a useful insight into some of the trends that may occur in the UK in the near future and besides that it is fascinating and fun.

This week, I felt it worthwhile to explore further the sort of technologies and services that could assist the financial practitioner and his/her business.

A few months ago, one of our guest contributors, Alex Craig posted a number of blogs about cloud computing, starting with Parting the Cloud around SaaS. Interestingly, Alex’s series of three blogs are in the top 10 most read blogs on our site and even now attract views – Alex describes in some detail the benefits of cloud computing, SaaS and alike and, as regular readers will know, we like SaaS a lot.

To be more specific, there are a number of providers of SaaS solutions in the financial services space – IntelliFlo’s Intelligent Office, True Potential and there are others – without labouring the point, SaaS solutions allow businesses to access feature rich services just be using the internet and, in the main, a PC. The major attraction for a growing business is that it is not necessary to purchase and maintain complex servers, wide-area and local-area networks – and this is true for all aspects of the business. Cloud computing, can provide:

1. Business Practice Management – a term we use to describe the front, middle and back offices of distributor businesses – very applicable to small to medium-sized business, SaaS suppliers remove the need to purchase specialised hardware and it also allows for multiple locations to use the system and not be tied to a single office location. Some vendors have started to allow access via smartphones, eg iPhone;

2. Email – there are a number of providers of Microsoft Exchange email services that supports Outlook, iPhone, Blackberrys etc. that requires no in-house server. For those of you who haven’t had the pleasure of setting up and running a Microsoft server with Microsoft Exchange, I would recommend avoiding the experience at all costs! An outsourced email provider not only looks after your precious email, they also protect you from the overwhelming volume of SPAM, malware and viruses;

3. Telephony and Fax – I covered this is some detail in part 1 but the same benefits apply – no capital cost, with scalable services to flex as your grow (or shrink) the business. One major advantage that voice over ip (VOIP) has is the removal of the ‘how many lines do you need?’ question – because VOIP is carried over a broadband connection, a single 8Mbit down an 800Kbit up standard ADSL line can carry around 6 simultaneous conversations – so, in effect, for a small business, a single dedicated ADSL line can cope with demand – and all on one published telephone number. Virtual fax services allow for the delivery into your email inbox, without the need for a dedicated BT line – also, outbound faxes can be sent using email, too;

4. Office applications – there are some solution providers that are able to roll-in as a bundle of the services described above and they can offer effectively a one-stop shop for telephony, applications and help-desk. Their offering can include the rental of the Microsoft Office suite, enabling a business to ‘share’ virtual copies of the program and removing the need to have one copy per user, as rarely does every member of staff use Microsoft Office at the same time;

All in all, it is now possible to create a complete virtual office, with none of the heavy-duty hardware, software and capital expenditure that would be required even 5 years’ ago. There is, however, an important issue that shouldn’t be discounted and that relates to taking professional advice about the setting up and procurement of the network services and infrastructure to support your new virtual office. There are many pitfalls and you should choose a vendor that has specific experience of these types of setup – however, once that has been sorted out, in the main it’s ‘plug and play’.

We’ve just finished a fascinating project to assist in the move of premises of a medium sized business, where the majority of the services they use moved from conventional services to their virtual equivalents, including telephony.

It was especially important for this client, as they were creating a split site between the centre of Birmingham and brand new premises some 3 miles aways in Digbeth – it was here that the virtualisation model would come to fore, as it was important for the outside world to perceive the organisation as a single entity – something that fits very well with a methodology that creates an environment where the only physical telecommunications’ method uses the internet.

For today, I am going to concentrate on their use of Voice Over IP (VOIP) services for their virtual switchboard, a hosted PBX sometimes known as vPBX – there are a number of suppliers of these type of services, but we used for this client Voipfone – for this client we used their offering to create a company switchboard that has 25 extensions, split over the two sites, with automatic call distribution, IVR, (with a personalised greeting to allow for call routing) and the setting up of users in defined business groups, eg Finance or General Enquiries. As with all these type of services, it is a pay-as-you-go model, with no long-term commitments with services, extensions, IVR all being able to be created or stopped as the business need changes.

The conventional vendors of switchboards are, naturally, a little sceptical about VOIP services – they sight call quality as a real issue together with availability and scalability – in reality, though, although the promise of VOIP is ‘plug and play’, you have to be very careful about the way in which you implement it, ensuring that you use high quality, business broadband services coupled with professional handsets – however, with the need to have the two highest costing items, the switchboard and the installation (and rental) of ISDN lines, being removed, the capital cost and ongoing call and service charges are significantly lower – see the Voipfone call charges for examples of the rates compared to BT. You are even not limited by geography, as one of our clients uses a USA toll-free number in addition to his UK numbers and the calls arrive at his office at no cost for the transatlantic hop – he loves that!

Whilst in this example our client has his own server and individual desktops for his computing needs, it is possible to extend the model to provide virtual desktop services also – in this way, programs like the Microsoft Office suite can be rented and used on demand, rather than purchased and put on individual workstations – once again, the key here is the broadband provision being robust and up to the job.

So, to summarise, what we have done here is to create an ‘Office in Box’ – electronically speaking – without the need for substantial upfront investment, the client has been able to create an environment for a few thousand pounds that would 10 years’ ago have costed, perhaps, ten times that amount. With the linkage of their two remote offices, they can perform tasks and communicate seamlessly across the business – and more important, they can scale (or change) their requirements almost instantly, without long-term commitments.

We are very pleased with the outcome and we know we have a delighted customer, which is great – we also were able to move his business in four hours, which we think is great, too!!

With Meaningful Money, he is pushing the boundaries away from the traditional brochureware site of many IFA practices with the quite brilliant and engaging use of video. Meaningful Money is in effect a library of video blogs about financial issues. In the videos, Pete gives his personal insights into how to manage finances and investments, how to plan for retirement and how to financial insure against various scenarios.

His videos cover the core principals of Financial planning, building the foundations of the financial plan, investments and risk management and general topical financial discussions. The videos are delivered in an engaging format, with Peter talking to the camera as he moves around the county. The style builds rapport and relationship (you feel you know Peter well after the first video) before the client has even met Peter.

The boldness in this approach is that it could enable clients to become more financial astute and to selfserve, convincing themselves that they don’t need financial advice. However, the hard truth is that for some clients, this may be the right thing to do and they may not be in the position to justify Pete’s fees yet (when they can I wouldn’t mind betting Peter is on the list of people to contact). The reality though for many clients is that they will realise the complexity of their financial situation and Peter is then ideally placed to help them.

The reach of Meaningful Money is of course is far wider than the Cornish boarders and Pete’s services through the use of technology are now also stretching their reach throughout the UK. Through the use of Skype Video he can contact clients easily and recreate some of the personal chemistry associated with face to face advice but without the cost and time of travelling to remote clients.

Meaningful Money is one of the most unusual and differentiated IFA websites we have seen and we recommend a review of its capability.

With adviser interest in making Platforms part of their business models, it would seem that there is a good commercial case for Platforms. Indeed, it is likely that firms will need to consider not just whether they do adopt a Platform strategy but why they wouldn’t. The FSA Discussion Paper 10/2 has added to the debate with a range of questions about the due diligence, ongoing management, segmentation and customer solution matching along with remuneration methods and transparency as well as best execution.

We have looked at a number of Platforms and written articles as part of our weekly PA column. We have also looked at a recent initiative by Capita that has seen the launch of the Synaptic [Platform] Comparator. There has been some debate about whether it is possible (or right) for a firm to choose a single Platform. The FSA paper said that although they do not expect firms to review the platform market for each client, they do expect firms to consider which platform(s) are appropriate for their client bank – or segments of their client bank – in general terms and then ensure the recommendation is suitable for individual clients…

Different parties have chosen to interpret the FSA statement in different ways. Clearly, there is further debate and lobbying to take place on what is and isn’t acceptable. The Consultation Paper was expected midyear but this has now slipped to Q3 – perhaps giving an indication that there are still some challenges to be resolved in the mind of the regulator. We have written a Paper on the subject of Platforms – available here…. In addition, we have reviewed the Synaptic Comparator product that has now been launched and the article will be published in Professional Adviser in a few weeks. One of the striking issues that Comparator raised was the big, maybe surprising, perhaps even shocking differences in the potential customer outcomes. Platforms do not have simple, consistently clear and transparent charges! Trying to understand the implications of the charges and to compare how these affect customers’ choices is a good thing (some may not agree). If you use a measure such as ‘reduction in yield’ (RIY), or total expense ratios (TER) it is possible to see the ’drag’ of charges on an investment and this can vary significantly between first and second choice as well as the best and worst – hundreds, thousands and tens of thousands of pounds!

By fragmenting the issue of choice, some may see comparison tools as undermining the modus operandi of Platforms as being a single economic asset management solution. However, the differences cannot be ignored and the industry is likely to close some of the gaps through competitive pressure and in time is also likely to consolidate Platform choice through M&A. We believe it is better that the industry sees and addresses the differences of choice and value early as we do not want to see another potential mis-selling scandal that hurts everyone.

Advisers need to look at Platforms to assess whether they are right for their business and for their clients. They should rule in or out of having a Platform strategy with a conscious justification that is reviewed regularly and tested against segments and individual needs. The issue of choice remains, not only at outset (even if a single Platform strategy can be justified when challenged) but also through ongoing reviews for how assessments are carried out and with what frequency – periodic or on each customer transaction.

As for Platform Operators (current and potential), the question of their own business case must be robustly assessed as there is a current trend to reduce costs that could reduce or remove margins. However, there is also a question about whether some Providers can decide not to become Operators if they are to remain viable businesses in the future.

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.

The vendors do break down to a number of categories to ease choice though. There are a few mortgage specialists for example – lead by TrigoldCrystal and Mortgage Brain. Choosing a mortgage system isn’t however a two horse race as IntelliFlo, 1st -The Exchange and Plum all have revitalised mortgage propositions.

There are also those with clear focus on financial planning end of the market with specialist planning tools linked directly to backoffice systems. Prestwood and JCS would fit into this category. The mainstream providers 1st – The Exchange and IntelliFlo have increasingly strong offerings in this space as well though.

The tools are also divided into those that have come from a back-office background and those from a front office/POS background. 1st – The Exchange, Plum and IntelliFlo all have a very strong pedigree in the back-office and lead the functionality charts in this area along with True Potential. Focus and TrigoldCrystal have strong POS backgrounds, while Distribution Technology, JCS, CCL and Prestwood have built upon their original strengths of supplying sophisticated financial planning tools. 1st – The Exchange’s recent acquisition of N4 improves their front office capability, especially in the mortgage area. While most of the vendors have now extended out from their initial position to support both front and back-office, True Potential has always supported the breadth of front and back-office functionality and has added depth to the functionality over the last few years, making them overall winners in the functional review.

Few of the vendors have shown that they can scale to support large corporate projects but Focus, Distribution Technology, Crystal and N4 have established capability here. IntelliFlo has made some inroads to the Corporate space with projects at AXA and AEGON (Scottish Equitable). The acquisition of N4 by 1st – The Exchange could be a springboard for them to extend into this space.
For the smaller organisations, there are a number of aggressively priced systems available including Durell, CCL and Plum.

To help navigate this maze of supplier decisions AT8 have produced our Practice Management Upd8. Our report takes a comprehensive look at the suppliers, tracks their functionality, their integrations and their price points. It makes direct comparisons of their functionality at point of sale, the middle office and back office. We also look at the industry standing of each supplier and their key differentiators. The report is available at £2,500 plus VAT. Anyone interested in receiving a copy of the survey should contact us at marketing@at8-group.com or phone +44 (0)121 314 2504

What fun, that was! I was glad he’d pre-ordered it, as he would have been very disappointed, as they ran out after about 2 hours for those people just chancing to purchase one. But we were successful and walked away very happy!

I, on the other hand, had to wait for my service provider to get themselves into gear to send me mine by DHL – far more civilised, yet considerably slower.

So over last weekend, I’ve had a chance to crawl over the new device and thought I’d share my first impressions of Apple’s new baby. I’ll also try not to delve into areas that other far more qualified people have commented on.

So in a nutshell, here are my observations:

• Heavier – it’s larger and heavier than the iPhone 3GS – it has glass on both sides which gives the device a substantial feel
• Display – the new high resolution display is gorgeous – crisp and clear, with text looking like a printed page
• Video Calling – FaceTime is the new video conferencing system that Apple has developed for the iPhone 4 – it’s good and works like the Mac’s iChat – only WiFi at present, but still very good
• Cameras – the new higher resolution camera is excellent and combined with iMovie, can produce HD video footage and edit the results in real time – stunning. There’s a front facing camera too for FaceTime
• Speed – it’s significantly quicker than the old iPhones – in fact, it has as much grunt as the recently launched iPad – I can’t help thinking, a new version of the iPad will be out soon.
• iOS4 – the new name for the iPhone Operating System – this is available for earlier versions, too, and adds some good extra functions

There have been some press comments about signal attenuation when holding the device, but this is something I’ve not experienced – in fact, the performance of the radio is a lot better than the 3GS, with usable signal in my office, where previously I struggled on the O₂ network. Also, once the unit is fitted with one of the new ‘bumpers’, a case manufactured for the first time by Apple, then all the exposed aluminium antennae are covered and so the ‘problem’ disappears – if you don’t have a bumper, then maybe taking Steve Jobs advice might help – “just don’t hold it that way”!

So is it a game changer? Well, Apple has responded well to its competitors – as we’ve mentioned before, it still is going to be interesting to see whether its controlling ethos will prevail or the more open ‘morals’ of Android will become more ubiquitous, but Apple do keep on changing the shape of the football pitch.

With innovations like iAds, the ability to monetise software developments more easily adds to Apple’s armoury and will no doubt change the way in which apps are funded which might encourage more to join the development game.