Back in the summer of 2019, the lang cat published a paper called A Disconnected World. This examined integration – or the lack of it – in the world of advisers and financial planners, and its impact.
Fragmented World, the follow up to that paper, has discovered the battling forces of fragmentation and integration throughout the technological landscape adviser firms must traverse.
One of the many findings from the report is that Letters of authority (LOAs) and transfers remain a massive source of frustration for those working in advice firms and financial planning practices. But the scale of harm being inflicted is pretty staggering.
When the lang cat tested the worst-case scenarios for time taken from submitting an LOA to getting full, satisfactory data, the timeframe often ran to several months. In the very bad cases, firms were waiting over six months for the data they had asked for.
The report is based on more than 40 interviews with advice professionals ranging from the big consolidators and national firms to the smaller specialists. The lang cat supplemented this with online research*, and also heard from providers, platforms and tech companies.
Through interviews with those professionals and providers, the guilty parties most frequently reported for frustratingly slow LOAs were:
► Legacy closed-book insurers and platforms who have grown by acquisition
► DC providers, especially Mercer, Towers Watson and Capita
How slow LOAs affect advisers directly
The advice process can be broken down to three main stages – onboarding, implementing and reporting. The first and last stages respectively can now operate completely digitally. Implementing a financial plan, however, is still a major issue because of LOAs.
To implement a plan for a typical client in their early 50s, the adviser will often have to deal with between 5 and 15 products. This means advisers need to create anything between 5 and 15 LOAs and agency transfer forms in order to be able to take control of the client’s plans, which often takes several months.
Some have tried to fix the problem, like Origo and its Unipass LOA, but it’s still early days, while some adviser and paraplanner groups have had varying levels of success in trying to unite more progressive providers in a set of common standards.
The lang cat principal Mark Polson said: “Despite the threat of regulatory action in this space, progress is not being made quickly enough. We need everyone to accept and adopt common standards before we see meaningful integration and automation.
“This part of the technological world needs to de-fragment before it can be fixed and properly connected.”
Wealth Wizards CEO and Founder Andrew Firth commented: “After the pandemic we saw a lot of processes speed up and barriers reduced for financial advisers.
“Wealth Wizards’ consumer-led and human-assisted (hybrid) guidance and advice platform automates key processes such as onboarding, fact finding, suitability report production and cashflow analysis. We are also looking at making the LOA process easier by creating automated digital signature and provider requests.”
One managing director of a financial planning firm told the lang cat: “Technology allows our clients to go from 0-100 in terms of their engagement, but they then fall off a cliff with LOAs and transfers taking months to complete.”
Another adviser said: “LOAs are the bane of the industry, not just for advisers but for providers as well. It makes absolutely no sense at all for everyone not to kind of join hands and try and work on this. It’s a perfect example of an industry that gone mad where we’re just creating more work for everybody.”
The section on Letters of authority is just one of many in Fragmented World, which explores the technological landscape as a whole for financial advisers, taking a viewing on the powerful and opposing integrating and fragmenting forces.
Five key advice market issues emerged during the in-depth research: digital ability is greater than technology; lack of control; data is the new oil; platforms aren’t enough; and clients expect more.
All of these issues are addressable, but the research found three fragmenting forces getting in the way of progress: misaligned commercial interests; decentralised control without tech to match it; and no shared desired view.
What’s more, advisers reported it was difficult to understand software before they buy it as more and more tech promises the Earth on integrations. Advisers often struggle to sort the good systems from the marketing hype. This was borne out from the findings of our online survey, where more than 7 in 10 firms agree that it’s impossible to make an informed comparison on software providers.
GBST Head of EMEA David Simpson commented: “Connectivity of systems to improve efficiency and the adviser and client experience is paramount to GBST’s product strategy. We recognise the importance of open access to data, common standards, ease of integration, paperless processes and reduced cost of ownership of maintenance to support this drive for improved efficiency.
“One of our key principles in developing platform technology is to provide a single core solution to all our customers, so any new feature, and that includes an API, becomes available to everyone in the same format, structure and functionality.”
Ed Dymott, Managing Director Wealth at Benchmark Capital, said: “Our services aim to help advisers navigate the complexity of integration with a turnkey solution, which covers the key services a high-quality financial planner needs to run their business.
“We support the entire lifecycle of an advice firm, helping practices launch, run more efficiently, accelerate growth, and then ultimately think about succession planning, with one simple aim – to help our advisers achieve more than they thought possible.”
*146 firms took part in the online survey. 75% were independent and 79% directly authorised.