Elephant in the corner - IFAs Marketing
Elephant in the corner
Published: 15 May, 2007
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Managing agents effectively is something providers can stick their head in the sand over, partly due to its inevitability and partly because it’s a pain in the neck
Distribution is now the key driver in the life and pensions market. The pace of change in the market has accelerated at such a rate in recent years that we are left with an industry that seems occasionally to be a little unsure of its role; particularly for the life provider. The direct salesforce has been removed, back-office processes and IT are often outsourced and responsibility for distribution has been outsourced to the IFA. Life providers have spent tens of millions on building their brands but no longer have control over their distribution. This presents a unique set of challenges in terms of managing the various agency partners a life company may deal with on a day-to-day basis.
A changing industry
Furthermore, new entrants have changed the benchmarks for distribution in terms of productivity and customer orientation. Outsourcers and other entrants to the market have ‘raised the bar’ in terms of cost management and process efficiency and the ways in which they can interact with distributors. As a result, existing companies and distribution channels will face an increasingly difficult challenge to remain competitive. We should expect further rationalisation of the life and pensions industry and, along with it, a shift towards more innovative forms of distribution. No-one has yet found the silver bullet for cost-effective distribution for the mass market, although we can expect bancassurance and direct writing to be the main winners in the evolving market.
Ignoring the obvious
Managing agents effectively in this confusing world is a headache for providers of all types. Indeed, it is the ‘elephant in the corner’ – everyone in the industry knows it’s there, but many have been studiously ignoring its looming bulk, precisely because it is a pain to deal with.
Distribution dilemmas
So what are IFAs really looking for from providers? Firstly, providers need to keep investing and developing e-services, as well as supplying advisers with a consistent level of information. Commissions need to be paid in a timely and accurate fashion, whatever back-office solution is in place at the adviser firm. In this current climate of increased regulation and compliance, advisers need to maximise their time spent advising clients rather than dealing with administration. IFAs spend on average 40% of their time on commission management and reconciliation – anything a life and pensions company can do to reduce that workload is going to make it a very attractive product provider.
One thing is clear – IFAs are looking for improvements in the way providers work with them, and in the way commissions are paid. If a provider is struggling to get to grips with the different requirements the IFAs have, it’s likely the distributor will eventually look elsewhere. But from the providers’ side, it’s notoriously difficult to justify an agency management overhaul because agency management impacts so many areas of the business.
Integral to the agency management dilemma is the well-documented issue of legacy systems. Providers will typically run several systems, either developed over time or gained by acquisition, and running on disparate technologies. These systems are typically creaking under the demands of managing, rewarding and incentivising thousands of different types of agencies. The distributors themselves are increasingly requesting flexible commission and benefits payments to match the vagaries of their business, and there is simply no way for most of the extant legacy systems out there in the market to be able to deliver this.
Good intelligence
Good agency management is not just about automating the administration of complex incentive plans to multiple advisers, though. Agency management is a key business intelligence issue for providers – or, at least, it should be. Providers need to understand which products are selling well and which channels working are well. They also need to understand which types of buyers are plumping for particular products. All of this information can be monitored through an intelligent agency management solution in order to continually improve and refocus the provider’s product sets. Competition to sell life and pensions is now fierce, and the web has made it far easier for consumers (and advisers) to compare and contrast the different products. In this increasingly commoditised business, it’s crucial to gain an understanding of what is working and what isn’t.
Bad for business
Providers who don’t sort out their agency management arrangements will lose business in the long run – indeed, given that it will take at least two years to implement and integrate a new solution, many providers may well find themselves reaching a ‘tipping point’ where they will be unable to support new deals. It’s imperative to be able to offer flexible distribution arrangements to keep up with movements on the IFA side – we can now see IFAs joining forces to do a single deal, and then parting again. As things stand, many providers are not set up to cope with this – and they need to be.
Trish Henry is head of sales and marketing at Mastek
http://www.pensions-management.co.uk/
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