The Money Management Internet round table

In a round table discussion on how technology is shaping the financial services industry, MONEY MANAGEMENT asked a panel of industry commentators if the future of online financial services will converge with the offline world to become the new face of the industry.

Money Management

What can we expect to see in the next 12 to 18 months in terms of the growth of online financial services?

Peter Horne

I'd summarise it as saying if it can be, it will be. I think we've just started to see the ball rolling and gathering momentum and whatever can be changed to fit the new medium will be changed.

Money Management

Do you think compared to the bigger picture we're only at the bottom of the curve?

Denis Rowe

Absolutely there's no stopping the things that are starting to happen. Radical things like transactions across institutions, where moving money between institutions just by dragging and dropping between funds and accounts on a computer screen occurs in real time. One of the key things that will come out is where a customer goes on line and we offer real time direct advice as well.

Peter Wilson

I think the growth will be exponential but there is also the danger that you can leave behind unfinished business with advisers who are not so technologically savvy, or technologically comfortable.

There are a lot of things that are already starting to happen, and I'm talking about things like integrating disparate pieces of functionality and information for advisers and using the web to do that. Yet I still think there is a long way to go in doing this basic work which isn't that sexy or leading edge.

Tim Birdsall

The answer is really convergence of services. There will be a single point of access for end user consumers and financial advisers to all the different pieces of information from whoever has to offer them. They are going to want to know that when they've given information to an organisation, that information has been given to the whole organisation.

We are starting to move away from just straight content through to full online transaction and providing a single interface and I think that's going to be the big picture for the next 12 months.

Peter Horne

A point that I would add is that if the customer can control it, they will. I think the way a lot of organisations have approached e-commerce is they were going to got out there and take control and own the portal and try and dominate the space. However what the customer wants is integrated information and transactions to be simple and secure, and it is happening but I'm not entirely sure that both are occurring in any one place.

Money Management

How does that work when considering the business of financial planners, in both the tied and untied distribution models?

Peter Wilson

I think from our online perspective the focus is on advisers rather than clients, on what technology can do for advisers. In terms of what advisers are looking for, what role can the web play in providing or fulfilling those basic requirements.

In the last few months we've looked at it less from the point of view of technology and more from the point of view of what advisers are looking for irrespective of whether that's online or offline.

So the value proposition to advisers needs to be based on what it is they are looking for and in my view that is three main things; improving their own effectiveness and efficiency, improving or enhancing their ability to provide service to, and manage, their clients, and streamlining their practice. There's nothing new in that but certainly from the feedback that we get those are still the core demands that advisers are looking to have fulfilled.

Money Management

Without the provision of personal information combined with personal advice, much of what is provided by individual planners is now available on the net. Therefore do you think financial advisers could be cut off from giving advice by the online financial services?

Denis Rowe

Technology is creating more opportunities for advisers and is freeing them up from a lot of mundane tasks they need to do just to work well, which is servicing clients and building a relationship. Through this clients can know the adviser is really moving from straight advice to relationship management with the customer.

Peter Wilson

It puts an onus on advisers to identify what exactly is the value they are adding. If the Web can do the basic and mundane stuff, then it means that advisers need to, and can, focus on that part which clients are looking for, which is straight value advice.

I think it is also misleading when people talk about the web as though it is black and white. From my perspective, it is going to fragment. Some customers may decide that they are happy to complete the entire process on line, but others will have different needs and there will be fragmentation where customers like the market in different ways for different products.

Peter Horne

The future's going to look brighter for advisers who understand and plan for what technology can do for them. Everyone talks about revolutionary models but the value chain hasn't changed yet and the adviser is still in the value chain, and they're going to remain so, and technology isn't necessary an inherent threat. Advisers still have to establish relationships and then have to maintain and service them.

In fact if you look at companies like Charles Schwab who have a high tech high touch approach, and have a branch strategy for the initial establishment of a relationship.

This means technology is important but it also means that the personal relationship is important and that's what the advisers got and that's what their key strength is.

I think in five years time an investor is going to turn up to an adviser with all the information collected from some online tool and put it in front of the adviser. And so technology is part of the advice process, but it's not going to give you all the advice. There is a saying "A fool with a tool is still a fool." Giving tools to investors doesn't mean it makes them any smarter at making decisions.

Money Management

How did you pitch your online strategy to advisers given that it could potentially slice off the bottom, low touch end of their market? How do you make your online offerings attractive to them when they could go somewhere else?

Denis Rowe

We made the pitch that it would allow them to focus more on the top end clients. Our advisers have two million customers that are supposedly working through advisers, there's no way 2000 advisers can help that many customers.

It was pitched so that we'll manage the bottom end and they'll still purchase products, and hopefully those customers will migrate up the value chain to make it more worthwhile to deal with them in the future. It's actually much better to maintain the relationship rather than lose the relationship altogether.

Brendan Gallagher

We have a fairly close relationship with advisers we deal with, and are concerned mainly with getting out there and finding out what clients and advisers need. This is fairly basic pieces of information.

Our approach is finding what advisers need and providing them with real solutions and then leading them towards some of the other solutions that we can provide.

We also contrasted the way we operate with the many changed systems at different organizations, where the back end has been cobbled together with legacy systems. While it's efficient at the front end, it may not be efficient at the back end when it comes to service for the adviser and client.

Denis Rowe

While advisers are online, a lot of what they do still falls into the manual processes of the back end. Our major focus is now on true back end processing on major systems where if someone applies online or through an adviser we can supply feedback through the whole process on where that application or policy is in the process.

Peter Horne

Our strategy is to make sure if the investor has an adviser then the adviser can see what the investor is doing through the advisory exchange so they are part of that interaction.

Investors know that is transparent since before they do a transaction we put up a big kind of health check and try to remind people that they should actually see their adviser rather than just do things online.

At the same time I don't think advisers are scared of online services. There are three camps; the guys who go 'technology, don't want to be involved with that' but there's not that many of those these days, then there's the ones who are reasonably ambivalent and then there's the ones who want to use it to service their clients as much as to service themselves.

Brendan Gallagher

The technology's changing so rapidly it's hard to for advisers to keep up in a number of different areas. We've dealt with advisers who have said that we can't give the power to the client to do some of the investment changes or various transactions they are calling for. They want to be included so it's very important the adviser and client have strong communications.

Money Management

Has most of the technology changes been driven from the adviser end in your experience?

Brendan Gallagher

If you give them a few solutions such as providing transaction information statements, they start thinking I've got a few other ideas. You might then be working on those and getting other ideas but you'll spark their interest in the technology and feedback starts flowing and then it can be trying to keep up with the needs they have identified.

Peter Horne

You can ask advisers what you want but you also have to be doing research and development and putting ideas in front of them. There is a need to bring experience and knowledge into the market as well so they can tell us what works, and what doesn't work from an end user's point of view.

Money Management

What has been successful and what has been a failure in the last 12-18 months?

Denis Rowe

The key drivers are telephone and Internet banking which has been a huge success. The successes are fairly simplistic things, such as share trading, internet banking and BPAY and would be the key movers of behaviour over the last year.

Brendan Gallagher

There is probably a few instances where someone has brought an idea from Europe or the United States and assumes the adviser has got broad band internet access for example. The technology is not really there for the average adviser and there are a number of cost limitations. So there are these ideas where the technology is actually going to drive the need, but the need's not really there.

Peter Horne

I don't think revolutionary approaches or re-engineering of business models has worked for anyone. Everyone always looks at technology to make these huge quantum leaps but incremental and collaborative improvement has worked better rather than taking a generational leap. We just know from past experience those leaps don't work both in your administration and processing and distribution models.

Brendan Gallagher

From the provider's perspective and also from the consumer's perspective, having these small incremental changes is a method of educating the users. If we have these incremental changes we can bring them along, rather than these radical changes which we don't want because it leaves too many people behind.

Peter Horne

I think technology's most successful when it's boring because people will just use it and it's not a big threat. Once it becomes either institutionalised or part of the social fabric like email has, it becomes boring and not revolutionary and that's when it's a success.

Money Management

What is the future for screen scraping and wrap accounts in the online environment?

Both have been touted as the next big thing but haven't stormed into the scene in the way they were expected.

Tim Birdsall

From a technological point of view, I don't think screen scraping is going to be the big thing because this is an uncontrolled environment where people can't really be trained or offered online help.

Peter Horne

A year ago it was wrap accounts versus master trusts, now its screen scrapers versus wrap accounts and people are looking to make a comparison because they understand new things by comparing them to old. Screen scrapers are only services but wrap accounts actually have features accessible from the product provider through consolidation not available through an aggregation function.

Denis Rowe

The aggregation in screen scraping will actually move to that basis as well because if it is possible to get transactions from multiple institutions and aggregate those transactions, this reflects a lot of the functions that are in a wrap account. Investors can see where the investment mix is, make proactive suggestions about moving investment mixes. This means investors are not only getting account balances, they are actually aggregating transactions as well.

Peter Horne

People like choice. So they're not going to give away choice for the sake of aggregation. I think on balance all of these new technologies have a role to play, but they don't necessarily fundamentally blast industries apart.

Denis Rowe

They like choice but resting above choice is the consideration of convenience as well. The aggregation is actually a serious convenience rather than going and visiting a dozen websites.

Brendan Gallagher

I think security or perceived security issues will override that, so people may think it is a great idea but when faced with having to hand over information, they may be reluctant. Whether that is a real security issue doesn't matter, it's what the user thinks is the issue and are they going to take that up.

Denis Rowe

That again is a choice and I can tell you serious numbers of people are taking it up. There is a risk there but is that more risky than keeping the information on a laptop in the back seat of a car. It's an opting thing, the customer is choosing to do this, no one is forcing them to give away their customer numbers and passwords.

Money Management

What can we expect to see in the next year or two?

Tim Birdsall

The globalisation process in the banking and finance sectors means there is a possibility through the Internet that products can be delivered out of any location. Whether that is going to be a reality I can't see it for quite awhile, but it's technically feasible.

Denis Rowe

One of the key drivers here is still trust and knowledge of the brand. And they will specifically choose investing in an international fund because that's where the research is coming from.

Tim Birdsall

I was thinking more of the competitive threat from offshore people using technology as the virtual means of getting to customers but as you say it might ultimately come back to trust and relationships and you can only have those to some extent on a domestic basis.

<I>Money Management would like to thank those industry representatives who participated in this discussion - AMP e-business leader Denis Rowe, BT senior vice president Peter Horne, AM Corporation internet services manager Brendan Gallagher, AXA e-commerce manager Peter Wilson, Presence on Line business development director Tim Birdsall.

Money Management would also like to thank Presence Online for coordinating the development, organisation and execution of the discussion.