Nothing to fear about a direct assault

Far from being a threat to advisers, those financial service providers with a strong track record in the direct business often bring the same levels of service to advisers. At least that's the opinion of consultancy TBOi knowledgebank.

Funds management executives have been known to shift in their seats slightly at the mention of their direct distribution business. Such is the power of intermediated distribution in Australia, any hint of success in direct distribution could be interpreted as a sign the organisation may be creating a competitor to their loyal advisers.

But as the financial planning industry continues to mature, advisers are beginning to accept direct distribution as complementary to rather than competing with advisers. As TBOi knowledgebank's Australian managing director Steve Tunley sees it, clients will use different ways to access financial service products at different times in their lives. He reckons most people are channel promiscuous.

"It's important to remember that customers aren't loyal to channels," he says.

"They switch channels depending on their product or service need, or at a particular lifestage or life event.

TBOi knowledgebank recently completed a study of direct distribution in a number of financial services groups which Tunley says found that there was no dilution of service to advisers as a result of successfully servicing clients directly.

Tunley says the research provides clear lessons for success in direct, but is no cause for advisers to question provider support for intermediated distribution.

"The research clearly shows that the direct channel is increasingly integrated as part of multi-channel distribution strategies," he says.

"There are no truly stand-alone direct business in Australia in areas that impact adviser based business. What's more, organisations admitted in survey responses that the direct channel is often used as a support channel for advisers."

One of the overwhelming messages coming from the survey, according to researcher Michael Parker, is the success of financial services groups which have traditionally had the strongest presence in the adviser distribution channel.

As the chart below attests, Colonial, BT and Rothschild were all judged highly by the TBOi knowledgebank survey.

As reported in Money Management, BBL Funds Management was judged to be the best direct distributor of retail financial services due to their consistent performance across all key performance indicators of service delivery and fulfilment.

The top five is rounded out by Rothschild, AMP Banking, Zurich and DirecDial, organisations which often outperformed BBL in certain areas, but could not match its consistency overall.

Direct Service Delivery & Fulfilment Benchmarks 1998-99 looks at 17 retail financial services across 50 key performance indicators. Parker says the survey shows that organisations which employ a direct channel strategy by stealth, performed surprisingly well in some key areas of direct service and fulfilment.

Tunley says the success of the likes of BT and Colonial demonstrates it is possible to create a direct business without creating conflict with the traditional adviser-based business.

"The fact that Rothschild, Zurich and BT are as good at service and fulfilment in direct as dedicated direct businesses such as BBL and Your Prosperity, should encourage tied advisers, and signal to independent advisers a mature, holistic approach to distribution by these organisations," he says.

"Importantly it reflects their corporate focus on achieving excellence in the customer experience. Undertaking direct channel service as well as, say Rothschild, adds to the organisation's capabilities across the service delivery chain with positive impacts on the service structure to advised clients. Also, most customers will move between advised and non-advised channels according to life stage. It's a bonus to advisers whose clients show a level of independence and desire to perform simple transactions direct."

While many of the financial services groups included in the study may not be readily identified as direct distributors, Parker says the groups were selected on the criteria which he describes as "a clearly identifiable direct channel strategy (regardless of disclosure)".

"Our criteria was simple," Parker says. "The organisation must have a strategy that enables the customer to purchase financial services using direct mail, the telephone or the Internet, without intermediation.

"Going by appearances, you might dispute BT, Colonial First State or Suncorp's inclusion, but believe me, the ability to engage with them directly is alive and well.

"Admittedly, some companies use the marketing benefits of 'direct' to acquire agent business, but as far as the customer experience is concerned such experiences are direct," Parker says.

Other findings of the study include doubts over the effectiveness of the Internet in direct distribution up to this point. Parker says the Internet is generally not integrated effectively into the other direct communication mediums such as telephones and mail.

In fact, the organisations researched in the study overwhelmingly favoured mail and telephones in their future direct strategies.

However, there was wide variation in the performance of those strategies. The research found the sales conversion process was jeopardised by such things as failing to provide reply paid envelopes and failing to follow up on successful sales further down the track.

The Rankings Table

Rank Organisation

1 BBL Funds Management

2 Rothschild Australia Asset Management

3 AMP Banking

4 Zurich direct

5 DirecDial Financial Services

6 E*Trade

7 Your Prosperity

8 BT Funds Management

9 NRMA Financial Services

10 Colonial First State

11 Commonwealth Financial Services

12 Macquarie Bank

13 County Direct

14 Rivkin Direct

15 Green Line Investor Services

16 National Mutual Direct

17 Suncorp