His consultancy analyses, benchmarks and ranks the tech propositions of the providers all advisers use. So where does F&TRC director Ian McKenna thinks the white heat of financial services technology will shine brightest in future? John Greenwood investigates
A former IFA, Ian McKenna has been one of the most high profile figures in the world of retail financial services technology for the last couple of decades. So with the Retail Distribution Review just around the corner, does he think the virtual IFA, delivered through the trusted workplace benefits portal, will one day replace the soon to be extinct commission-based financial adviser?
It seems human obsolescence is some way off yet. “I have been spending a lot of time going around the world looking at what leading edge looks like and people are developing solutions that go a long way down that road. But even Generation Y still desire some human support, even if it is not face to face but in the form of someone in a call centre or on Facetime,” he says. “Can you do it from a technical point of view? Yes. Is the market ready for it? Not yet.”
The virtual adviser will probably take a bit longer to reach these shores in any event, he argues, because developments in using technology to deliver advice have been slowed down in the UK as providers have been preoccupied with the twin burdens of implementing auto-enrolment and the RDR.
But there are tools overseas that are leaving UK providers’ propositions in their wake he says. McKenna points to money management tool HelloWallet in the United States by way of example. HelloWallet looks at the individual’s entire finances and not just their savings and has 400,000 users in the US, most of whom receive the service by virtue of being employees of blue chip companies. “It gives ongoing advice, delivering budgeting tools, personal finance tips on how to get out of debt, get the best deals and save for big ticket items and for retirement. While MoneyVista is targeted largely at individuals, HelloWallet is largely employer-paid,” he says.
Helping employees with their day-to-day problems is the real opportunity for employer-based propositions, he argues. “One of the problems in the UK is we have been focusing too much on what we are going to give people 20 or 30 years down the line rather than what you can do for people today,” he says. “If you can help people today you are going to build loyal customers.”
It is a view that reflects the way the nation has changed from having a savings culture to a debt culture. “One worry I do have about auto-enrolment is the number of people auto-enrolment will to push over the edge? Moneysupermarket did some research a couple of months ago showing for a third of people losing another £50 month would break them. It would be better to help them get their finances in place today and then automatically enrolling them. Putting into the workplace a tool that can help them avoid this happening has to be a smart move.
“A lot of the leading edge propositions around the world are about helping people with their day to day finances. People would be better able to save if their finances were in order,” he says.
He points to statistics that show some of the better tools in the US getting customers accessing their online services every other day, with some users even accessing them four or five times a day.
“In the US services deliver information onto a phone that tells people not just what their balance is, but what their fixed outgoings are until the next payday, and estimates what their variable outgoings are likely to be until the next payday. So people have far more control over their finances. We all recognise the scourge of payday lenders so what are we doing to help people avoid having to go to them. I think looking after employees’ financial health is just as important as their physical health. If you have got an employee who has got debt problems, they are not focused at work,” he says.
McKenna thinks the current distractions of the RDR and auto-enrolment has left providers punch-drunk.
“The RDR and auto-enrolment have caused a fundamental weakness in the UK. Providers have had to prepare for this and they haven’t looked at the wider changes that have taken place in society.
“The vast majority of the working population now has a smart phone. In the lower income brackets the mobile phone is becoming the primary way of accessing the internet because they do not have the internet at home. Tablets are getting more affordable, with some costing little more than £100. That is how you embed yourself into people’s lives, by giving them the things they want to use every day,” he says, while giving bleak warnings to any provider who misses the boat.
“Any financial services player operating today who does not have a plan B is in serious trouble. Think of a business that has not been changed by digital mobile technology. We have just put voice recognition software on all the machines in our office – now people don’t use keyboards, they just talk to their machines. I believe we could see a rapid transformation,” he says.
He is scathing about the way corporate wrap is rolling out in the UK. “I think some of the organisations that have been focused around corporate wrap have got too caught up in the idea and have lost sight of what the customers actually want. Yes, there is an appetite amongst senior management for open architecture-type functionality. But it is amongst the higher earners who are a very small part of the market. Will people use a corporate Isa? Yes if it is a really good rate, but if it isn’t… “
So if he is down on what corporate wrap offerings are doing at the present, does he not then buy into the argument that the workplace is going to compete with the banks in the high street for the sale of financial services products? “Yes, it will, absolutely. But we need to embed far more day-to-day things into it to engage people. Just trying to sell more long-term savings products is not going to get people involved and win back their trust. If you deliver long-term savings products along with things that allow people to take control of their money, then the opportunity is huge,” he says.
Ian McKenna and F&TRC are set to launch a workplace savings and benefits comparison service that allows employers and advisers to rank providers across a selected range of benefits.
Under the system, which is due to go live before Christmas, an employer or adviser can select five main priorities they have for the benefits proposition they want to implement from a list of 30 factors – for example salary sacrifice, auto-enrolment, valuations and client reports, benefit selection and scheme set-up. They can then weight their selections to reflect the importance they place on each of the factors they have selected. The system will then say which provider’s proposition best meets the needs of the benefits package the organisation is looking to implement.
Users can drill down within factors to get a more detailed look – for example, the desired emphasis on a high-performing auto-enrolment proposition can be looked at more closely to see which providers rank highest in terms of eligibility, premium collection and communication. The service, which will be free to advisers and employers, reflects F&TRC’s view of a provider’s functionality, although it does not rank on grounds of price and value for money. F&TRC plans to recoup revenue from the proposition by marketing the management information it gathers from running the service. But it has no plans to sell referrals. Advisers will be able to pay for a white-labelled version however. Standalone auto-enrolment and group risk tools are also planned.
McKenna says: “The service will help organisations make better decisions based on exactly the benefits proposition the employer wants to put in place. It moves away from a simple ranking of providers by saying one is better than another, to reflect the fact that different employers want different things from their benefits propositions and from the providers supplying them.
“The service is not designed to come up with a single answer, but to help employers and advisers create a sensible shortlist for a beauty parade.”
The adviser version of the service is available at www.advisersoftware.com, with the employer version available at www.yourbenefitfinder.com.
All about Ian McKenna
Lives – Highbury, London (supports Spurs)
Career – Joined insurer Guardian Royal Exchange straight from school. Worked for various insurance brokers.
Ran own financial advisory business. Ceased to be authorised in 1997.
Set up F&TRC as a standalone technology consultancy in 1995
McKenna’s odyssey into financial services did not start with the techy geek in his bedroom origin that one might have expected. “Far from it. I once went into my office at the weekend and trying to turn on an Amstrad computer and it took me half an hour to find the ‘on’ switch. And I realised here was a part of my business I knew nothing about, so I resolved there and then to change that.
“Back then I had a column in Financial Adviser magazine talking about general IFA issues. I then wrote one piece on technology from which point all sorts of people started asking me to be on technology committees. One single comment piece in Financial Adviser quite literally changed my life.”