There are many ways in which the development of technology in the financial services sector will help advisers prepare for the implementation of the retail distribution review at the end of the year, but I believe that improvements to research procedures and planning tools will potentially make the greatest difference.
It now sounds as unbelievable as the time, up until the mid-1990s, when we did not start hyperventilating when we were without phone reception for more than three minutes. As recently as a decade ago the term ‘research software’ used to refer to a compact disc filled with product details that would be sent out monthly. Inevitably the sheer amount of information on these discs meant that as soon as they were created they were almost guaranteed to be out of date.
The FSA’s guidelines for the post-RDR standards of independent and restricted advice, with the focus on the importance of research, make that CD sound as outdated as stone wheels on a car.
Constant evolution in the world of planning tools means that major players in the market are now battling it out on how many tens of thousands of products and investments they cover, how many seconds it takes to return results and how advanced the audit trails are when produced by one of their searches.
However, no matter how advanced the research tool you are using is, please bear in mind that it needs to be used as part of your investment advice process, rather than as a substitute for it. Technology has improved leaps and bounds in the past decade, but there are parts of advising, sales and research which will never become automated, such as truly knowing your client and understanding why an investment solution which looks perfect on paper is not always perfect for in real life. Moreover you should be clear about what you want from technology. Help with investment or product research is one thing, but what about tools to assist with cash-flow analysis, budget planning, pension shortfall analysis and other such services that offer tangible benefits to clients - benefits they may be willing to pay for? Rather than just using research tools for their own sake, an overall planning process that powers a firm’s service proposition to clients is essential.
Using a platform can add another layer of complexity, as many have their own, bespoke, research tools built in. No doubt this was a costly and time-consuming exercise but, in my experience, not one which has reaped many rewards. At the Capita conference last year, independent consultant Mark Loosmore said: “Advisers want to use their own attitude to risk tools, research tools and sales processing or factfinds. It is important to offer consistent advice across multiple platforms and this means investing in their technology tools and then integrating into platforms.”
Recent conversations with advisers suggest this is still the case for the majority. There may be several reasons why an adviser would prefer to stick with one research tool - habit, a preference for one interface and style of tool or the desire to retain consistency across their advice process. There are enough truly independent tools in the market now that advisers can easily avoid the ‘bias’ that was often a problem with tools created by providers.
However, just because a tool is independent it does not mean that it avoids subtle assumptions and technicalities which can produce unwittingly skewed results. Once advisers become aware of these slight differences in output, it is understandable that they may be wary about using more than one research tool, particularly when it is likely that multiple advisers across one firm might see one client and it would be extremely unnerving for that client to receive conflicting investment advice from members of the same firm.
This is a further demonstration that the tool needs to form just part of a robust, repeatable and independent planning process.
Be wary also of the direct link between any research or planning tool and a single platform. Any research tool that can produce the ‘comprehensive and fair analysis of the relevant market’ required to fulfil the FSA’s criteria for independent advice may lead to the use of a platform, or multiple platforms, however, it could equally lead to the use of a discretionary fund manager or non-platform solution. With the risk of belabouring a rather obvious point, it should lead to the recommendation of whatever is best for the individual need of a specific client at that exact time in their life.
A platform or research tool should not be the product that the client buys. Rather it should be the overall advice process that the client sees value in and chooses to buy. Research tools, platforms and wider planning tools should be the hidden parts of that advice process, powering a clear and concise service programme that delivers demonstrable value and as much energy and thought should go into how that service programme is articulated and delivered as to what the technology is that drives it.
Dan Russell is head of sales of Verbatim Asset Management
Key points
* Improvements to research procedures and planning tools will potentially make the greatest difference to advisers post-RDR
* Using a platform can add another layer of complexity
* A platform or research tool should be the overall advice process which the client sees value in and chooses to buy
Winners and losers
There are a number of research tools on the market, but the biggest players include Defaqto, Capita’s Synaptic, O&M and Selectapension. Selectapension was ranked one of the highest by the Finance & Technology Research Centre last year, winning nine five stars on its functionality for its growing pension products, but doing less well when it comes to the at retirement market Selectapension did less well on investments, losing out to the likes of Distribution Technology and Focus. Those doing well on risk profiling include Finametrica and Voyant as well as Focus.
