Accomodating multiple choice

How insurers and advice firms will facilitate consumer guidance and primary advice processes is shooting up the agenda, reports Ian McKenna, director of the Financial Technology Research Centre

It is often easy to fail to recognise quite how far technology has taken us. For example, any adviser telephoning a life office for a valuation, unit holdings or transaction history for an plan holder, be they an individual client or a member of a group scheme, is almost certainly wasting both time and money.

In recent years almost all life companies have delivered the ability to obtain this information at the click of a mouse directly into the adviser’s client management system. The vast majority of adviser client management systems from companies like 1st Software, Capita Financial Software (formerly Quay and others) Intelliflo, Plum, SSP (formerly Sirius) and X Ware (formerly JCS) are now able to receive such information from most leading insurers enabling advisers to considerably reduce the amount of time and money wasted on calling insures for policy values, fund information etc before client visits.

It will normally be necessary for the adviser firms to spend some time making sure the services are operating correctly. Once established, this is a more efficient way to obtain information for client reporting. It is important to make sure the provider’s agency records are aligned with the advisers. Many large firms have gone through consolidation and some insurers records may not fully reflect the effect of mergers or acquisitions. Also policy numbers must be submitted in exactly the format insurers systems need to receive them, which believe it or not will frequently be subtly different from the way such numbers appear on paper documentation. For the most part, however, once the software has been set up correctly it will function smoothly from then on.

A number of client management systems now allow the adviser to set up a scheduled update on a regular basis so up to date information is already at hand in the advisers systems when it is needed. Theoretically advisers could actually set up a scheduled valuation overnight for all clients on a daily basis. But in practice setting a system to value every pension every day, for what is after all a long term investment, has to be excessive. Inevitably messages will occasionally fail creating exceptions which need to be resolved, so in order to make sure these systems do not generate a counter productive amount of additional work it is probably more realistic to schedule valuation updates on a monthly basis to reflect the latest contribution. Should a market event take place, such as the recent stockmarket volatility in early January whole portfolios can be valued as one off event in real time.

While applauding this valuable improvement to customer service for both advisers and scheme members, I believe that there is still more important work to be done. Consumers increasingly want to understand the value of all their pension arrangements to obtain a holistic perspective of their retirement income. An increasing number of services are being built to assist in this process. Two months ago I pointed out that the TUC has already put a pension forecasting service online and it is clear that the Thoresen review is considering such options. At the same time I am aware of a number of other new services that are in development that will give consumers the ability to generate detailed projections of their future income. I believe that these services should be able to benefit from such electronic messages by increasing the number of organisations that can request such information.

Advisers do not need to look far to see an obvious example of where this would help. More often than not individual employees will have different advisers to those used by their employer for their group scheme. Presently any electronic messaging would only be available to the adviser appointed by the employer. If information is to be shared with the member’s adviser this involves some for of manual notation on a file and paper or telephone requests when updates are needed. Is it unreasonable to expect insurers’ systems to be able to recognise that more than one adviser is entitled to receive information?

One of the hot topics amongst insurers and major advice firms at present is how they will accommodate consumer guidance and primary advice processes. It looks increasingly likely that either as a result of the RDR or the Thoresen review the industry is going to be pushed or pulled down this path. Personally I do not see this as a bad thing, but we should certainly start working on how to accommodate consumers who want to use more than one adviser, or advice method now, rather than wait until the FSA or the Treasury seek to force it upon us.