How are you going to ensure you achieve profitability?

January 1, 2013 Sham Gill

As the Retail Distribution Review comes into force, the focus for IFAs will be on compliance for the first few months of 2013. But after that the question will soon come back to the old, familiar one of profitability. Considering the cost of compliance, the real impacts on adviser remuneration and the loss of commissions, how are you going to ensure you achieve profitability?

The fundamental drivers of increasing productivity of advisers and reducing the cost of administration will not change post-RDR. On the contrary, these will still be the only ways of achieving profitable growth.

Given the ongoing weakness of the economy, winning new investment clients is going to remain tough. So the best way to protect your profit is going to be working more efficiently and seeking competitive advantage. This is where technology can make a real difference. Technology has recently played a major part in simplifying processes and improving client engagement across the financial services industry.

Software has helped advisers build robust and repeatable processes. Processes that can streamline their businesses, ensuring transparency and making it easier to reconcile payments from multiple sources with the advice clients receive. Being able to provide a track record of adviser charges in real time will reduce the likely effect on transaction activity, save time and, in the long term, cut costs. But the functional fit of software in delivering efficiency is only one, albeit important, aspect that firms should consider. Technology needs to support the wider business, processes and people. One of the biggest challenges is the IT infrastructure and maintenance costs for an organisation. Let me explain. As technology has evolved so have the ways we consume it. In the 90s, client management system updates came on a disk or CD – and for the more adventurous through FTP downloads. In the 00s, technology started to migrate over to Software as a Service (SaaS) but this only addressed part of the problem. For an organisation that is reliant on other applications outside of their customer management systems, they still had to bear the costs of the IT maintenance and people costs.

In this decade, adviser firms should be able to call on IT as just another service. As some firms choose to outsource compliance and planning, the same should be available for your IT. This, essentially, is what is known as Platform as a Service (PaaS). Whether that’s hosting Microsoft Office, you email, your CRM system or company intranet, your provider should be able to host any application for you. Then you’d be able to access these applications in much the same way you can add third party channels such as the Disney Channel to your Sky or Virgin TV package. This removes your maintenance and upkeep overhead, and cuts the need for upfront capital expenditure. You will be able to access your emails from any internet-enabled device, from your phone or tablet to your laptop.  And because all your applications are linked, you are able to agree business with your client and automatically generate the paperwork you need on the spot, with all of that valuable information backing up to your administration system automatically.

Of course there are things you need to keep in mind. Data and information security, for example. The financial strength of your company. Getting the right service levels agreed. This solution will not be right for all type of business. How would your provider store your client data? How would they ensure its security? Can they prove that they comply with the Data Protection Act – or with the relevant ISO security standards? These are factors you need to know before you hand over your data.

With the right partner that has the expertise in specifically servicing financial advice businesses and a proven track record in delivering CMS solutions, the benefits can be huge. Some firms have reported a 55% reduction in IT costs just by moving to an outsourced approach. With all of these hosting options available, just think of the precious time and cost, previously devoted to IT, that your firm could use to focus on the core of your business – delivering good quality advice to your clients.

About the Author

Sham Gill

Head of Strategy and Propositions — SSP Select and SSP Adviser. “What interests me is understanding how the financial services and general insurance sectors are evolving and helping clients respond to the challenges that this brings. I really enjoy working with clients to identify the business and operational drivers of value and then designing and delivering innovative insurance solutions that help them to meet tomorrow’s challenges.”

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