March 2008

Forming the right model

Using technology to help define the way you conduct business is a compelling proposition. Such tools offer a potential solution to a number of pressing business issues. However, before you commit to a long-term, expensive agreement, think very carefully as any decision could have fundamental implications for your business in the future.

Your business model should determine the choice of software solutions you use, not the other way around. It's a competitive, rapidly changing market and the providers of these tools want your business, but you may already own software that has the potential to deliver the vast majority of the benefits you need, or at least form the core of your future solution.

What will it do for me?

The benefits of technology solutions (back-office software, extranets, fund supermarkets, wraps and other platforms) are difficult to compare. A good solution should enable you to view, change and service the relationship with your client from a single source. However, things are seldom that simple. Before bringing major change into your organisation, you must clearly understand why you're considering it in the first place. These 'drivers for change' typically fall into the following categories:

build closer relationships with your customers;

write more profitable business;

reduce or contain costs;

change your business or remuneration model;

respond to legislative or compliance drivers.

An audit of your internal processes (opportunity and sales management, customer service, operational and compliance) is an effective way of deciding what your business may need in the future. Once you've done this, you'll have a choice: optimise and make the most of what you already have, add something to your existing portfolio of tools, or change everything, in effect start from scratch.

The first option is one often overlooked by advisers. If you run a back-office system, you may already have the potential to deliver most of the services you need to support your business in the future. Most solutions can now link with a large range of product providers and platforms. This allows new business submission, risk and asset analysis, portfolio valuations and other electronic services to be integrated in a way that can add substantial value to your client propositions.

Mature back-office platforms such as 1st and Quay CCD can provide you with a number of 'platform-like' features. Web-based tools such as Intelliflo's Intelligent Office allow you to consider options such as remote working and controlled client access to portfolio valuations.

Questions to ask yourself - and your technology provider

It isn't easy to compare the various solutions out there, as many providers will approach the same problem from different angles. There are a few questions you can ask that can help if you're close to deciding on a technology strategy for your organisation.

1. True cost of ownership. Are there initial charges? Are costs based on funds under management or business volume? Is there a per-user cost? Is there mandatory training or consultancy? Is the solution modular (you pay for base functionality but other things are additional cost)? Obtain a three-year cost based on assumed levels of business written. This will help you understand the true cost of the solution, and allow you to compare against other solutions if you're undertaking a tender process or shortlist.

2. Fit for your business. Don't squeeze your own processes around the way your software forces you to work. Using your business model as an example, run through the 'ideal customer journey' from first enquiry to client review. Critically assess how the solution would deal with this. If there are any obvious gaps or inconsistencies, this should be a warning sign.

3. Service differentiation. Understand how the solution helps you to build and manage a specialised proposition for specific client groups. Can you get a single view across all asset types and providers? Are there client self-service capabilities? Can you customise reports for different clients?

4. Supplier commitment. The competitive landscape for technology-based solutions has changed considerably in the past few years. Can you be confident that the company you're considering will still be there in three years? What's their commitment to your size of organisation? How important is an independent solution to you?

5. Legacy business. Does the solution deal with the business you already manage? Don't underestimate the work that will result from adding a new solution to what you already have. How will client and business data be moved from any existing tool onto the new solution? Can your database be merged with third-party data, for example, information held on providers' back-office systems?

6. Electronic services. Online quotes, new business, valuations, electronic commission and cross-platform integration are all now possible. Make sure you're clear on the present-day capability of the solution you're considering, and that you're shown a clear roadmap for where the tools will be further developed in future.

7. Business process automation. How well can the solution represent your real-life processes? Managing the sales pipeline, accountancy, compliance and commission functions can be extremely complex - how does the tool deal with these? Is it easy to set up and maintain?

8. Support and exit strategy. What happens when things go wrong? Poor support is a criticism of many technology solutions, so make sure you understand the process in detail and know how many dedicated support staff are available. Finally, if the relationship goes sour or your business outgrows the solution, what reassurance do you have that you could move your data and processes off the platform?

Technology-based solutions offer potentially great benefits to advisers. Comparing one solution against another is complex, but by examining your current capability and being clear on what your business actually needs, you'll be in a position of strength when choosing the solution that works for you.

Keith Hare
E-Business Manager
Aegon Scottish Equitable