Implementing regulatory reforms will be an acid test of software providers and their relationships with planners. Simon Hoyle reports.

The financial service technology company IRESS believes opt in “will happen, one way or another”. In August it will release an update to its market-leading Xplan software to help planners implement this contentious Future of Financial Advice (FoFA) reform.

Software development never ceases anyway; but when there’s a substantial package of legislative reforms thrown into the mix, it represents a real test of the vendors’ ability to respond constructively to advisers’ wants and needs.

“We have an insecurity complex about sitting still, which ensures we continue to think and respond nimbly to new opportunities, many of which are often presented by clients,” says Andrew Walsh, managing director of IRESS.

The market for financial planning software is dominated by a handful of players. The research group Investment Trends says one third of planners use Xplan as their main planning software. Another 20 per cent use Coin, and 10 per cent use VisiPlan. Four per cent use Midwinter, and another 11 per cent use Midwinter in addition to other software.

Recep Peker, an analyst with Investment Trends, says that a quarter of all planners expect their software providers to help them implement opt in.

‘We think we can double that difference with our new scalable limited advice’

He also says Investment Trends’ research reveals “that more planners are looking to save time in providing simple advice and conducting client reviews” via scalable advice.

Robert McCabe, Macquarie Adviser Services’ head of product and technology, Coin and web, says that “while regulatory reform can present challenges, it also presents opportunities”.

McCabe says that as we await details on how FoFA will be implemented, Coin has “focused on enhancing the reporting capabilities linked to our workflow capabilities, to show how much time advisers are spending on each task”.

“For example, this helps offer a clear picture of how much [time] an adviser is putting into a client, to determine an appropriate level of remuneration from that client.

“We have also focused on further integrating our business intelligence tool into the platform.

“We have seen an increase in interest in our business intelligence tool during the past six months, as discussion about regulatory reform has increased.”

McCabe says Macquarie’s software is geared towards supporting planners who introduce scalable advice.

“It produces a simple Statement of Advice [SoA] that can be timed – for example, capturing a 30- or 60-minute advice process,” he says.

“So, as an example, if there is an industry push towards providing advice for $300, this tool can enable an adviser to create a simple plan taking one hour, which may cost them $120 of time.

“As such, there is still a potential for profit to be made by the adviser from a scalable advice offering like this, through using software. This is very much dependent on the adviser, the practice and the client, however.

“Client segmentation tools are also relevant here, which enable the adviser to match the scale of advice proposition offered to the type of client.”

IRESS’s Walsh says the company plans to “provide flexible solutions which, in many cases, either already exist, or simply extend functionality already available within Xplan”.

“For example, the client portal module, Client Online Access, could already support the requirement for clients to review the services being provided and elect to opt in, should the legislation allow online elections to occur,” he says.

“The system’s workflow capability can already support requirements such as the automated creation of documents, which can even be printed, enveloped and sent to the client without human involvement.

“The inclusion of bar codes on these documents – again, already available – would ensure that scanned executed material could be automatically filed, made available to the client in a secure, online filing cabinet, and a reminder set, to manage the process when next due.

“Should the reforms be introduced, it would appear likely that the adviser’s CRM will be best positioned to offer the most efficient manner in which to manage opt-in arrangements – especially where multiple products are in place.”

Matthew Esler, executive director, Strategy & Technical, for Midwinter, says growing numbers of financial planners are “seeking specialist, best-of-breed software rather than a generalist approach”.

Esler says Midwinter has “undertaken and completed a range of new developments in light of the new FOFA reforms.

He says Midwinter is updating its systems “to cater for the new opt-in requirements for adviser remuneration, enabling the one-year confirmation and two-year opt-in certificate to be automatically generated and sent to clients”.

“The opt-in capability will be released around September 2011,” he says.

Esler also says modifications to Midwinter’s Reasonable Basis – Cashflow & Capital module will “enable financial advisers to illustrate a client’s current position and a range of multiple alternative limited advice recommendations”.

“It costs financial planning practices between 17 and 26 per cent more to produce a full plan [than a limited plan], according to Investment Trends’ latest research,” Esler says.

“We think we can double that difference with our new scalable limited advice. Advisers will also now have access to a tool that ensures the client understands what the adviser is recommending and how it is commensurate and scalable to their needs.

Simon Hoyle is head of market insight for CoreData Research.
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