Financial advisors report significant variations in quality of online service

Source: 1st

Results from one of the industry's largest collaborative research studies has shown that "huge" or "significant" variations in the quality of online services is one of the biggest factors affecting advisers' decisions to adopt ecommerce within their business.

The Adviser E-Enquiry independent research project, led by adviser technology suppliers 1st, with support from Prudential, Scottish Widows, Standard Life, Webline and IBM, surveyed over 400 adviser firms in two studies conducted throughout April and May 2005.

In the second phase survey, looking at para-planners and administrators (the highest users of online services), 90% said that there was a "huge" or "significant" variation in the "ease of use" of provider extranet services. A further 66% said the variety of online services across provider extranets was "huge" or "significant" and 27% (the majority answer) said that previous "bad experiences" with some of the poorest online services was their biggest deterrent to further use of e-commerce within their firm.

Rory Curran, executive chairman of 1st, explains: "This study has given us a fascinating insight into the attitudinal reasons why many adviser firms still fail to use ecommerce effectively within their firms. It seems to be a case of "the good, the bad and the ugly". Tremendous variations in the quality of
online services and the negative effect of using one of the poorest ones first is a big factor threatening the future adoption of e-commerce in our industry. For most advisers the time and cost saving benefits of doing valuations, submissions and getting technical support online are very important but our concern has to be with the adviser firms who have already been put off online services through bad experiences. This information will be extremely valuable in helping us work with our industry partners to help them develop practical solutions to help."

The Adviser E-Enquiry research included two phases – the first amongst 389 firms covering an industry representative sample of adviser firms, by size, regulatory status and including a mix of principals, administrators and senior managers. Phase two included a more in-depth analysis of adviser firms which were users of Adviser Office from 1st. Interviews amongst these 50 firms were predominantly done with the regular users of e-commerce within the organisations, mainly para-planners and administrators, rather than just principals and owners.

There was a clear distinction in the findings of the two research phases which showed that the larger, directly regulated, firms were far less likely to want financial incentives to encourage them to do business online. In the phase one study, amongst smaller, network firms, "financial incentives" was commonly the main factor given as the reason these firms would decide to work online rather than offline. However, both groups agreed that training would be a useful motivation to help them use e-commerce services more broadly.

Other key results included:

Phase One Study – all firms (mainly principals and IFAs)
40% of these firms were directly regulated, most were networks or nationals and 60% were from smaller firms (less than 3 RIs)

  • The largest deterrents to using online services were insufficient product provider coverage (14%); poor service reliability (12%) and 11% said that online services were more difficult to use than paper-based methods
  • Online quotation services, extranets, portals and online research services are all used extensively (over 40% used these daily) but usage of other online services starts to fall away after this
  • Greater support, training and financial incentives would motivate increased usage of all the services listed
  • Better speed of processing (65%), familiarity with websites (55%) and financial incentives (42%) would encourage IFAs to do policy servicing online. Other factors mentioned included: Improved, standardised systems and sites, easy access & availability, reliable and responsive sites and product coverage
  • Most important services for regular users were seen to be online quotation services (50% said "very important"), fund supermarket/wrap services (38%), online services integrated with back office (36%) and online valuations or policy servicing (36%)
  • The majority of IFAs never submit business online using pre-populated data straight from their back office database (72% answered "never" or "rarely")
  • Lack of familiarity with the service and speed of processing were the two major factors which non-frequent users cited as the biggest deterrents to their further adoption of portals and extranets (average of 40% for both questions)
  • IFAs not using Portals, Extranets, online e-submissions or online new business blamed this on the fact that they felt it took a longer time to complete (33%) re-entering data was a problem (17%) or lacked training/experience (16%).

Phase Two Study – regular ecommerce users (para-planners & administrators)
80% of these firms were directly regulated and from larger firms (more than 3 RIs)

  • 64% of this group (the majority) said that "administrators and para-planners" were the largest users of e-commerce services within their firm. (Only 24% said "advisers")
  • 85% (highest choice) said that the most important factor which influenced their decision to do business online rather than in the "traditional" paper-based way was "dependent on the provider and the ease of using their particular service" – only 23% said commission differentials were important
  • When asked what the main benefits were of using online services, four answers scored over 30%: minimising errors; speed of processing; reduced cost and better client service
  • Looking at portals and extranets, by far the biggest factor affecting the choice of which ones to use was "speed of the particular service" with 78%, followed by "less complex and intuitive" at 52% - no other reason achieved over 20%
  • A significant majority (60%) said that the speed of the particular service was the most crucial factor affecting their decision to do valuations online
  • 62% of all those surveyed said they had never received any training on portals or online adviser services and 90% said if e-commerce training was available they would be in a position to take advantage of it

Shaun Crawford, insurance executive, IBM Business Global Services, comments: "So much research has been done before on the usage of e-commerce within the adviser industry, much of it painting a picture that seems incredibly positive, but perhaps not always being entirely accurate. We believe this "spin factor" can, in its own right, prove dangerous - giving the impression that everything is running smoothly and not much needs to be done.

"Now, through the research and analysis our "E-Enquiry group" has done, we can see a more realistic picture - one in which the situation is actually very patchy and fragmented. Whilst some parts of the adviser community have indeed taken e-commerce services on board, others are still far from recognising the benefits and as we have seen, some have been put off by poor experiences with services which are hard to use or poorly designed. We recognise of course that some companies have already made great efforts to provide effective training and support to advisers, but this example needs to be expanded more widely in order that greater consistency is achieved.

"Using this feedback we can now work pro-actively to help both parties, the e-commerce service providers who need to make improvements and the adviser firms who need advice, training and support to enable them to regain confidence in e-commerce as a powerful business-beneficial tool."

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