Firstperson Executive

Wrap Implementation: An Overview

2011-07-05T01:32:00.000-07:00

Considering that online adoption / Wrap Implementation is a relatively new entity, where does the Implementation team sit?

Is it operations, sales or a stand alone function?

How do these roles typically work?

IFA Networks / Product providers (who have a Wrap offering):(whether it’s their own built platform or white labelled through an independent)

Platform Providers historically have a separate specialist function, with specialist peer groups for Group Pensions, protection and individual pensions, all reporting into a Head of Specialist Sales.

These individuals are typically referred to as Platform Consultants.

IFA Networks, work collaboratively with their chosen white labelled platform. The platform provider will offer onsite assistance with their partnered IFA firms. Once the IFA Network experiences strong net inflow of assets there would be a strong business case to recruit their own specialist Implementation team.

Platform consultants are targeted on traction. Meaning that after the Business Development Manager has won engagement of a particular IFA firm, the Platform consultants are targeted on the amount of advisers who position funds on platform. They have less strategic input and would normally be more sales focused than operational.

Historically, their bonus will be paid on Individual KPIs (signing up XYZ amount of Advisors per firm) with a corporate led bonus.

Independent platforms / (fully) functional Wraps:

Field based Implementation consultants have a greater operational control. These individuals (similar to the platform consultants with product providers) will come in after the Business Development Managers have won the initial business. Where it differs is that there will be more emphasis on functionality and operations, hence greater understanding of the integration dynamics and being the main bridge between relationship management (with IFAs) and the ‘what can actually be delivered message’ via operational teams.

Independent Implementation consultants are better placed to manage client expectations with regard to the Business Development Managers over-promising on delivery in order to win the business.

The independents do have field-based Implementation, but the majority is run via the telephone in tandem with the Business development Managers in the field.

Summary

Firstperson’s findings are that online adoption / Wrap Implementation and RDR consultancy work is already, and will continue to be, increasing in demand. Product Providers are continually looking to become more profitable, and due to Asset Management firms and Banks looking to offer wider investment solutions to the intermediary sector, they need to become ‘Service Providers’ rather than Product Providers.

Product Providers are continuing to look at how they can partner with IFA and Network firms to come in line with the RDR distribution demands.

Whether it’s a Product Provider, Network, Asset Management firm, or a bank, the market demands a higher level of skills from its permanent members of staff. It requires individuals to have a wider understanding of the breadth of Industry functions and how they interact with one another. This is presenting gaps in the market and skill shortages. The online adoption / Wrap Implementation role is the broker consultant of the future for the firms who wish to become RDR compliant and create a sustainable proposition for market.

Product Providers will need a combination of experienced external hires and be open to individuals who have Wrap expertise but in a more sales focused roles currently. There are more sales individuals than online adoption / Wrap Implementation professionals in the market place. Being open to these backgrounds will create a wider pool to search from and create better results. If this route is to be considered, it is essential that the package would be weighted to a higher basic salary with less bonus potential. This will facilitate a more successful transition for sales professionals into a role that requires more emphasis on knowledge rather than sales skills. It would also support the demand for better service and lower emphasis on product selling. Finally, internal promotion of potential talent would be crucial. The experienced hires will be a critical part of creating and managing a ast track programme for suitable individuals.

Firstperson believes that Product Providers who are currently looking at Wrap Implementation and Sales campaigns need to consider the way they go about their search. This exercise would compliment a more detailed, collaborative and partnered approach with senior stakeholders, actual decision makers and a specialist recruitment firm.

The chosen recruitment firm needs to be knowledgeable and more focused on recognising individuals who can demonstrate dynamism, adaptability and a more holistic understanding of financial services distribution and its challenges it faces in the run up to the RDR. This is where Firstperson can add value.

Simon Evans, Lead Consultant
Simon.evans@firstperson-executive.com
0117 914 2314

Clients and Agencies : Has 'The Special Relationship' Changed?

2011-07-04T03:15:00.000-07:00

Clients and Agencies: Has the ‘Special Relationship’ Changed?

The ‘Special Relationship’ is a phrase used to describe the exceptionally close relations between the UK and the USA, following its use in a 1946 speech by Winston Churchill. Although there has been much talk of recent strains to this relationship, the level of cooperation between the countries remains ‘unparalleled’ among major powers.

In Executive Search, which is traditionally the recruitment vehicle of choice for senior and strategically important hires, we have considered the client/provider relationship a special one too. Since hiring a key executive is such an important business decision, the Executive Recruiter must be seen as a trusted and well-informed partner, and the relationship very much a dialogic and consultative process. Over a period of time a strong bond is formed between a client and their chosen Executive Recruitment partner. The role of the best Executive Recruitment agencies has therefore evolved over time to be more akin to that of a Management Consultant. In fact, Executive Search was originally an offshoot from Management Consulting, and the best Executive Search professionals strive to maintain that professionalism and ability.

This is not surprising considering that we:
• Ensure confidentiality/discretion. We can be counted upon to be discreet in our enquiries for a potential candidate where company confidentiality is important, especially in the case of senior level recruitment, or sensitive market considerations, where careless talk can affect the bottom line.
• Keep costs down. Consider the high cost of maintaining an in house recruitment department. While Executive Search firms charge in the range of 20% to 35% of a candidate’s annual salary for the first year, this is still only a one-time cost and far less than the cost of running your own recruiting department. In addition, Executive Recruitment agencies will deliver a manageable selection of qualified and vetted candidates, meaning a client’s senior managers have more time to focus on their daily priorities. This can have huge monetary repercussion on the bottom line of a company. An Executive Search firm’s networking capability also gives access to candidates who are beyond the reach of an in-house recruitment team, talent that is not on the open market.
• Protect clients’ own employees. When a company hires an Executive Recruitment agency to fulfill its recruiting needs, the recruitment firm agrees not to poach people from that company for the duration of the contract.

• Provide insider knowledge and market information. Recruitment firms are in constant touch with a large number of candidates across several industries. We build strong personal relationship with candidates and are able to get valuable industry information and insight from them. Our unique dialogue with the market can deliver insights about an employer’s brand and attraction to candidates, as well as information that can help make decisions about strategy and structuring.
• Help set the right salary package. We will tell you if your offer is competitive, excessive or below industry standard, and help ensure retention of key candidates once they have been recruited.
• Bring a fresh perspective to the recruitment process. Working with an external agency that is removed from the internal politics and preferences that plague senior hires provides distinct advantages. A professional Executive Search agency will bring an objectivity and rigorous selection process, allowing them to present the best candidate for the requirement.
• Provide an end-to-end service. Executive Search professionals can be involved throughout the entire hiring process- identifying appropriate candidates, approaching and qualifying them, conducting detailed interviews, and presenting well-qualified and vetted candidates. We also carefully manage the resignation and offer process, and maintain contact with candidates as they start their new role.
• Keep client interests at the heart of the search. Executive Search professionals are acutely aware of their position as brand ambassadors for their clients. We articulate and promote the qualities of the client that make them aspirational as an employer. The best Search consultancies will have done their research and be well-informed about the client’s offering, their reputation, changes within the business and the industry, and future prospects. Senior Executives (themselves well-placed, professional and appropriately rewarded already) appreciate this level of engagement, and are more likely to consider a move seriously when an approach is professional and well-informed.

But given the volatile nature of markets recently, has this ‘special relationship’ changed? Are clients less likely to value all the tangible and intangible benefits of using a professional Search consultancy? Would they prefer an in-house recruitment capability to an external hiring solution?

There is no doubt that the proliferation of job boards, the increasing tendency to have an internal Resourcing Specialist on board, the perceived expense of using retained search, the tapping-up of internal referrals and the belief that Search consultancies ‘take months’ to deliver results, have led some to question the ‘special relationship’. There has been turmoil in the economy over the past few years and this has impacted the recruitment of Senior Executives. But it is widely agreed that the picture is improving. Following a precipitous 32.5% decline in 2009 (according to the Association of Executive Search Consultants, AESC), the industry grew by an average of 28.5% in 2010 and is on track to do well again in 2011.

Does this mean the worst is over, clients will once more appreciate the value in engaging Search firms, and the ‘special relationship’ is back on track? ‘Relationship’ implies longevity and resilience and trust. Though the client/Search consultancy partnership has been shaken, key concepts such as professionalism, well-informed competence, standards of ethical behaviour, and flexibility of approach, will ensure that the relationship will continue into the future, and that more ‘special relationships’ will grow and flourish too.

Gina Sargunar
Service Delivery & Research

Increasing Demands and Significant Risks: The Growing World of Asset Transition

2011-06-23T09:05:00.000-07:00

What Is Asset Transition And Why Is It In Demand?

Asset Transitions occur when a client wishes to replace an investment manager or change the investment strategy of a pension scheme. This can be an incredibly complex and difficult process requiring an art as well as a technical skill, and the potential risks involved are significant. As the Defined Benefit market shrinks and the Defined Contribution market continues to mature, Asset Transition is likely to become an increasingly high profile and competitive area, with highly sought after experts and reputations that are key to winning new business.

Historically, Asset Transition was the domain of the fund management groups, but the market is seeing a rising number of insurance companies and platform providers who are entering this space as transitions become more mainstream and demand increases. Companies with a proven track record of success and known capability within Asset Transition are finding that it can make the difference in winning a new scheme. However, Asset Transition is not an easy thing to do, and as new businesses enter the market it may be that they do not appreciate the work and intricacies required to be successful. In the DC world, the complexity arises from the fact that the assets are attached to each member based on their individual investment choices, and it is key to preserve the value of these assets whilst minimising out of market exposure. The process can be very complex, firstly because of issues arising from transitioning the funds themselves and secondly as assets need to be attributed accurately back to the members. This is an involved process that can take many weeks to plan and execute successfully, and every case is different.

Asset Transition expertise is becoming more in demand as competition increases, platforms proliferate, and the DC market matures. The more traditional method of liquidating assets to then reinvest can often reduce the value by around 1%, a significant implication for investors nearing retirement and a driver for Asset Transition, which can be more efficient. Regulation is driving platforms to provide reregistration of assets for individuals, and Asset Transition is the answer to this in the Corporate Pensions arena. Transitions have always happened within DB, but DC is more complicated and calls for different skills. DC Asset transition demands a lot of technical skill and knowledge, but there is also a definite art to it, and there are more techniques now than there have been previously. Transitions in the DC space are more visible to members, thus attracting more attention, and also assets to be transitioned tend to be larger in DC. This profile of skills is much sought after and not easy to find. Because of all this, it is becoming increasingly popular to promote from within and for companies to ‘grow their own’ expertise in house. The advantage here is that these individuals will be familiar with the company’s set up and internal systems and their capability is a known quantity.

The pace of change is also driving the demand for DC Asset Transition skills. Employers and trustees are reviewing their schemes, going to more platforms and diversifying their assets. There is an increased demand for flexibility, for blended funds that allow more choice and modification. The market is seeing a lot of market and proposition developments that continue to drive dynamism and competition. This, coupled with a greater awareness of the need and ability to minimise out of market risk and transaction cost through carefully managing transitions, is driving the demand for this rare skill set.

The Pitfalls Of Getting It Wrong
Getting the process wrong can be a very expensive mistake to make. DC Asset Transition is highly visible to members, and in an extremely competitive marketplace you can be sure that competitors and customers are watching closely for mistakes. There’s a significant reputational risk involved here, as well as the responsibility to the interests of members. Volatile markets only further emphasise the need to manage out of market risk and minimise the cost of transactions. There are also risks in the need to work with other parties as schemes transition. Those working inside fund managers and platform providers work with Third Party Administrators and Consultants, handling sometimes very high profile cases. If the work isn’t accurate on both sides then there is a huge cost implication, a significant amount of work involved to correct the mistake, as well as the risk to your reputation. If neither party accepts the mistake or moves to rectify the errors, then potentially the value of members’ investments could be negatively impacted. Given that the provision of bad or inaccurate advice has recently been a big media story, and the increased public concerns over pensions, perhaps it will be mistakes in transitioning our pension schemes that provide the next public scandal for Financial Services.

One thing is sure, as the DC world continues to grow and Asset Transition becomes increasingly sophisticated and well-known then there will be a growing number of watchful eyeballs scrutinising every move of their vital pensions as the media and regulators sharpen their claws for those who make mistakes.

Giles Lewis, June 2011
With thanks to those who kindly contributed their time and thinking to help me put this piece together.

Reasons to be Cheerful

2011-04-15T02:30:00.000-07:00

2008 saw a global financial crisis unfold and this triggered a massive debate in, among other areas, global pensions. Since Lehman Brothers’ meltdown in September 2008, the impact on the financial world in general, and pension schemes in particular, has been enormous, with many swinging from surplus to deficit in a matter of weeks.

According to recent research from Pension Capital Strategies, private sector UK pension schemes had a funding level of 98% in October 2008, under the standard accounting measure used in company reports, but this had fallen to 79% a year later. Strong performance in equity markets since March 2009 has not been sufficient to fill the gap – if anything, those gains are being more than offset by falling bond spreads and increasing liabilities. Rising longevity, uncertainty about inflation and interest rates and unpredictability within the equity and bond markets have added to the issues being faced. Many companies are now looking at risks within their pension schemes.

Even before the crisis, companies were transferring investment risk from employer to employee. In 2000, there were only seven companies in the FTSE 100 that had closed their defined benefit or final salary schemes to new entrants. Today, the picture is almost entirely the opposite, and there are only three (Tesco, Cadbury and Diageo) that still run a defined benefit scheme that is open to new members. And in more recent times, a large number of companies have taken this trend one step further and closed defined benefit schemes to future accrual. Vodafone, Barclays, Whitbread and Fujitsu have all closed schemes to existing employees. Following the precedent set by these high-profile companies, it seems inevitable that others will follow.

Transference of risk must be done fairly and with clarity. It is obvious that DC schemes are not as rewarding for long-term employees in the same way as DB schemes are. Employers have shifted emphasis from retention and reward to a transactional contract. Decisions and options need to be explained clearly: many people lack basic information or are sufficiently financially literate to make informed choices, though this is increasingly something that Government is legislating to improve.

‘The capital market volatility of the last few years has left DC members reeling. Nobody told them that all the risk and corresponding responsibility for decision making sits squarely with them. By acknowledging that a DC pension is something that needs to be done by someone rather than to them, service providers can start to develop propositions and messages that are better suited to an increasingly discerning audience. The industry would be well advised to start treating its customers as exactly that - consumers of a product for which there are numerous substitutes. Fully understanding the motivations and behaviours of our target audience is essential to the development of the next evolution of DC. The time for complacency is over’, agrees Nigel Aston, Director – DCisions

Innovation must meet needs, ensuring that new ideas deliver value, and creative minds must find new ways of meeting client needs. The Government has signalled their agreement on the need for pension reform, though the full scope of programmes is unclear. Professionals in the business conclude:

‘Market dislocations provide an opportunity for truly active managers to achieve good risk-adjusted returns and those that take a macro view of the world will find opportunities in the current crisis’, said Mark Hodgson, Managing Director of Gatemore Capital Investment.
According to Colin Williams, MD of Friends Life, ‘This watershed moment for pensions and savings may be leaving us gasping for breath. But Iain Duncan Smith’s lofty ambition to ‘make it crystal clear to young savers that it pays to save’ could be the coup de grace for savings inertia in the UK. This directive must continue to inform the decisions the coalition makes, but the industry must seize the initiative it is being handed. Changes to pensions and savings will continue to circle like confetti at a wedding, but private provision, so often the bridesmaid, is ready for its big day’.

Without credible innovation and viable products, deep-seated problems cannot be solved. Analysts and experts agree that the State will move away from pension provision, and employers will want to at best share the burden with the employee. There seems to be a responsible, informed and reasoned debate taking place right now among all stakeholders. On the surface it appears to be about pension provision in the future, but actually, the debate is about the kind of society we wish to live in. The hope is it will be safe, secure and sustainable and fair.

Cart Before the Horse?

2010-11-23T01:38:00.000-08:00

Cart Before the Horse?
Simon Evans, Lead Consultant, RDR

A bright new age, driven by innovation and new technologies, beckons to us all: No longer do we need to trudge down to the restaurant, or evening classes to learn a new language, or queue for hours for tickets. The internet, mobile communication, and other frankly amazing new ‘star-trek’ devices have changed every aspect of our lives

So too in business, specifically, (since that is where I am expert), the Financial Services sector. It is in the midst of unprecedented change. Indeed, it would not be wrong to say this is a transformation that is under way, and the landscape will not be recognisable in a few years.

We are familiar with the impact RDR will have in just over 24 Months. IFAs are already assessing its impact, and devising ways of meeting all the (sometimes conflicting) stakeholder requirements. Wrap platforms are viewed as key to ensuring that independent advice is given in an efficient and cost-effective (and technologically advanced) manner, and there are a wide range of Wrap offerings available to choose from. Where early adopters such as CoFunds, Standard Life, Transact, Fidelity led the way, Barclays will follow

But have they been rewarded for their efforts? Early investors in innovation traditionally and justly reap the financial benefit of their trail-blazing. They made all the initial effort, after all, and they were far-sighted enough to study their market place, see the need, and act to fill it. Given today’s announcement of Macquarie exiting the UK wrap provision market, due to ‘challenging’ business conditions, what are we to think?

In the context of the UK, the demand is massive, and Macquarie folding is particularly puzzling as the size of the potential Wrap and Platform market is estimated at £1.8 trillion of assets and so far all platforms combined total just over 100Bn.

This leaves a huge potential market still available as the Wrap and Platform development in the UK is still in its early stages. So there is more than enough business to go round.

I would guess "execution challenges", another cited reason given by the company, is the real key in this case, as this would indicate a failure to deliver despite high start-up expenditure, and hence reduced business volumes.

Time and time again it has been proved that large reserves, inducing vast expenditure, are not a recipe for success. AMEX, Lifetime, and now Macquarie (not to mention many expensive false starts by other providers) go to prove my point.

In fact, good business management, good systems and delivering a service that meets market expectation are what are essential, and not merely the ‘jump on the bandwagon’ ethos, the ‘dazzle them with lights and mirrors’ adoption of new technology.

Innovation for innovation’s sake does not work. Due diligence, with it’s implied study of the market, and of technology, with a clear view of their aims and ambitions are as important as the resources (money - yes, but crucially the right people, too).

The news of Macquarie’s demise is already resulting in scepticism and caution: IFAs are watching to see who will be next. Do Transact, Ascentric , Novia and Nucleus have a firm enough footing to weather the turbulence before technology is outdated and the solvency rules catch them out? Are their sponsors’ pockets deep enough, and are they patient enough to stay in the market? And will IFAs thank their stars for a wake-up call to properly investigate the provider they sign up to? Some providers have indeed spent time and money in developing a sound business model, together with an understanding of the Wrap market, and will succeed. Others won’t be so lucky.

So yes, technology is amazing, and we live in exciting times. But there is need too, for the old-fashioned stuff: common sense, diligence, caution and the long view.

The Silver Lining

2010-11-22T06:08:00.000-08:00

The Silver Lining
Simon Evans, Lead Consultant, RDR

RDR is coming, and as the deadline approaches, talk everywhere is of the problems and confusions it will bring. A recent survey by JP Morgan of over 200 Wealth Management firms revealed that:

Fewer than half say they currently meet the RDR's definition of independence and can advise across the full range of retail investment products.
30% expect outsourcing of wealth management by IFAs to increase significantly
43% of wealth management firms expect the cost of implementing the RDR to be high, or very high
Most believe the cost of RDR is to be met through reduced profit margins, lower staff remuneration, and higher client charges

There are plans by some firms to look at ways around the need to conform. There is a growing trend of UK-based IFA firms looking to use 'passporting' to benefit from the regulatory regime of a different country as RDR draws closer.

Faced with a threat of extniction after 2012, the opportunity to continue advising in the UK from a foreign base is a tempting proposition for those who are unwilling or unable to conform to the RDR's requirements.

But why not look at the positives?

Professionalism: The past 18 months have challenged traditional thinking about investing and asset allocation, diversification and correlation. Wealth managers must now be prepared to respond to clients' needs to understand, access and communicate with advisors regarding their relationship, products and services. And advisors must have sufficient information from objective sources regarding all products and services, to answer questions regarding performance and degree of risk.

The advent of RDR is prompting a structural shift in value away from old-fashioned providers, and towards the advisor as customer.

Professionalism will increase, though many do concede that the cost of qualifications will be steep and more qualified staff will expect to earn more. Dr Peter Williams, Head of Industry Development at Aegon, accepts this fact, but believes that increased professionalism within the sector is vital.

He states that:'The RDR started off with the right objectives. Two in particular stood out (for me):

(1) To increase consumers' trust and confidence, and (2) Increase the number of consumers using our (provider) goods and (adviser) services. I firmly believe that the move to Level 4 is a step in the right direction and will go a long way to achieving 1. However at the top echelons of advice, Level 6 - Chartered Financial Planner - should be seen as the real goal. All the independent research I have seen and my own academic research, points to Chartered being the level that the consumer expects. This is not to say that all advisers will want to be, or will need to be, Chartered. The future will have various levels of advice and qualification'.

Operational Efficiencies: The issue of requiring transparency, accessibility and performance by clients means IFAs will need to re-engineer their services in order to reduce costs, and may do so using fund supermarkets and wrap accounts, both of which offer real opportunities to cut operational costs.

Outsourcing: Also, more than half of wealth management firms surveyed believe outsourcing of wealth management by advisory firms will increase, with 30% believing it will increase significantly. Solicitors and Accountants outnumber IFAs 5:1, suggesting IFAs will be at an advantage in the professional connections market. 80% of Solicitors and Accountants currently refer clients to an IFA, and both these groups of professionals believe this will increase after RDR implementation. The RDR will encourage more solicitors and accountants to forge alliances with IFAs as professional standards become clearer and more aligned to their own. RDR would raise the IFA's competitiveness in these professional markets.

IFAs themselves widely acknowledge the commercial and client benefits of oursourcing. Most expect to outsource in order to access expert fund research.

Research conducted by Axa recently reveals that many consumers prefer IFA channels to Banks or Accountants, but acknowledge there is a huge difference between preference and reality. Axa believes the contrast between agreement and acceptance is a clear indication that IFAs who are helped to market to new audiences will capture market share, despite concerns about the impact of RDR.

Aviva's research meanwhile, indicates that large numbers of IFAs will leave the industry, while those who remain are likely to adopt business models to service fewer and wealthier clients. As with any dislocation, there will be winners and losers, and it is the fear of losing (in some cases the expectation of losing), that is driving most of the industry resistance to the RDR. The conclusion is similar to Axa's: Customers on the whole will be better off in terms of price, access and performance, and IFAs need help to achieve this.

At the heart of all the changes will be the need for system changes: Extra IT resources, and therefore expertise in terms of design, implementation and training will be in demand. Also, with many IFAs wondering if they will be able to afford to service their smaller clients, the solution may need to be based on technology to be cost-effective. Online support could be the focus moving forward, and wrap providers already provide an online forum to support IFAs, together with IT support and training to ensure their platform fits the IFA's business objectives.

Many wealth managers believe demand for their services will increase, partly as others exit the industry, or are forced tomerge. A number hope that the entire advice sector will adopt a GP/Specialist structure, with generalist planning outsourcing to specialist investment managers.

Certainly the impact of RDR goes beyond the issue of re-training and it's associated costs and disruptions. What will emerge at the end of the implementation process will be a professional, innovative, responsive and accountable body of IFAs, with consumer confidence and growth as their reward.

Postscript: MPs have been granted a three-hour slot for a full Parliamentary debate on the RDR. This follows on from the first half-hour RDR debate MP Harriet Baldwin, a fromer investment manager at JP Morgan, secured last month. Financial Secretary to the Treasury, Mark Hoban MP, caused anger among IFAs during that debate when he compared the current Level-3 minimum qualification for advisors to that of a McDonald's shift worker.

Ms Baldwin's office says the correspondence from IFAs 'has not stopped' since last month's debate. 'Everyday we get more emails and letters'.

'Grandfathering', the appropriateness of exams, and the McDonald's comment are the hottest topics, she says.

Shrunken Heads!?

2009-05-08T07:02:00.000-07:00

As the globe spins further into recession, and businesses continue to reduce their work force, the challenge of recruiting those specific, hard to find individuals who fit a role’s unique requirements has shifted. The talent pool has become suddenly flooded with capable individuals seeking their next role; job advertisements yield an embarrassment of riches. Consequently, has the role of the headhunter been shrunk? With this deluge of talent, is the headhunter left high and dry, looking rather superfluous and uncomfortable over there in the corner? Surely now that more people are looking, it has become a lot easier for a business to attract the talent they need on their own. Isn’t it just a case of putting out a carefully worded advertisement on targeted job boards or in specific publications? In a market with this many people actively looking, the talent will come flocking! And if this is the case, has the age of the headhunter come to a close? Because if the pickings are this easy, the practice of headhunting seems somewhat anachronistic, and (dare I say it?) redundant.

Digging Deeper…
Well, that could be one view, and these are certainly strange and exciting times for many professionals, including headhunters. But the impression of easy pickings is a red herring, a mirage. In a world overpopulated with individuals looking for their next role, and with more people applying to advertisements than at any point in recent memory, ironically the role of the headhunter has become even more crucial. Of course, some big heads will find themselves shrunk down to size, but for those headhunters that really know their market, and take the time to build understanding, consultative relationships with their clients and their candidates, there is definitely opportunity out there and value they can add. There are more people competing for a (comparatively) smaller number of available roles. Many of these individuals will be highly skilled and determined to prove that they are the right person for the job. However, that isn’t to say they necessarily are. If it’s a niche, unusual role that requires a specific, hard to find skill set, maybe the right person for the job isn’t one of those applicants. Maybe the right person for that job is already employed, working away, building an enviable résumé of successes in a competitor. But how can you know that, and how do you reach that person? Surely if they are that valuable, that unusual, that skilled, then in these uncertain times they are going to be even harder to attract than ever?

This is the kind of situation where a professional headhunter can step up, provide an answer to that question, and add genuine value. In these turbulent times, headhunting isn’t dead. In fact it is more vital than ever.

Thinking Heads

In a flooded market place, headhunting takes on greater value. A skilled headhunter will engage with the client and read between the lines of a brief, taking the time to really build an understanding of the business, its values and ambitions. A professional headhunter will listen, but a superlative headhunter will also contribute. Headhunters can become trusted partners to a business, giving real input and insight into the process and strategy, and influencing the thinking of decision makers. Headhunters have their ears closely to the ground; they can offer a different perspective that is closer to the heart of the beast. They can feed back the pulse of the market place to their clients, and crucially are also likely to have a view on how their client’s strategy compares with their competitors’. An accomplished headhunter can look beyond the headlines, and will take the trouble to understand the key underlying purpose of the job, and what the best fit candidates will really look like and sound like, not just in terms of skill set, but in terms of their background, personality, ethics, aspirations, and everything else.

Looking Beyond The Obvious…
Given the current market, almost every advertisement for a new role results in a torrent of applications; a flood of CVs. Whilst it is entirely likely that a strong candidate who ticks most or all of the boxes required lurks somewhere amongst that mountain of responses, it’s going to take time- and skill- to find it. However, a good headhunter can step in (hopefully before your money has been spent) and save a great deal of time and effort. A successful headhunter will already have a network of top candidates in place, or be able to tap up their network to find those hard to reach people who really know the ins and outs of that particular role. A valued headhunter will enable you to leapfrog the lengthy sifting process that often follows an advertised campaign, and instead present two or three well-qualified candidates who you’ll want to meet. In addition, given the intimate relationships that headhunters enjoy with their particular market, they are also able to bring out those candidates who may or may not stand out on paper. With such a large volume of profiles to sift through, it can be easy to miss a great candidate if their expertise isn’t obvious at first glance. A practiced headhunter will be able to identify and understand that candidate swiftly, reading between the lines of the CV and approaching those conversations with insight.

Thinking Smarter…
With such a competitive market, many of those candidates will be looking at more than one opportunity, and it can be frustrating if they choose to change direction at the last minute. A headhunter can help eliminate this risk. Headhunters typically source candidates who are not on the open market; they have access to highly skilled individuals who may not be found anywhere else, those people who are ‘passively looking’, those people who don’t typically respond to job advertisements. Likewise, with the current backdrop, many people who are currently employed are reluctant to take their chance on a new role. After all, they may be perfectly content where they are. It’s a known quantity, there’s little risk. A skilled headhunter, someone with a genuine relationship with their client, and a deep understanding of the role they’re recruiting for can approach that individual and engage them, make them see the value of that move and position the advantages of that opportunity in a way that a humble advert cannot. This is particularly valuable if a role demands a niche or particular set of skills or experience that is hard to find and that may not come through from the open market. A headhunter can run a highly targeted search, approaching select individuals from specific competitors to find their client the perfect match. Not just someone who ticks most of the boxes, but someone who ticks all of the boxes, and then goes on to draw some more boxes you didn’t know were there and then tick them too.

The art of headhunting isn’t dead, and it can be an art in the right hands. The heads aren’t shrunk, they’re just working harder, thinking smarter to bring those individuals to their clients.

Talking Heads

Talking, talking, talking. Headhunters do a lot of talking. Good headhunters do a lot of listening too. They listen to their clients, they listen to the market, and they listen to their candidates as well. A headhunter isn’t just a valued partner to their client, they can also become a trusted advisor. The relationship works the other way around. A headhunter is out there talking to decision makers in various businesses across the sector, and the information they glean and the knowledge they gain of the market can be invaluable to those individuals they engage with from a candidate perspective. A consultative headhunter can take on a mentoring, career coaching role to their candidate. With a detailed knowledge of the market, the hunter can give a frank and honest evaluation of that candidate’s skills, their background, their CV, and from that conversation can give them ideas about what direction they can push their career in, and what opportunities and organisations would fit them best. A headhunter can even help a candidate improve their CV, teasing out the salient points and cutting out the soft stuff. And contrary to popular belief, most headhunters can spell and punctuate.

Putting Two And Two Together…
A headhunter that is in touch with their chosen marketplace is well placed to have a view on new opportunities before they hit the wider market. In certain cases, a headhunter who has taken the time to understand their client and build that relationship with them can be there at the creation of a new opportunity. Both of these scenarios can be a benefit to their candidate. A candidate that has been well briefed on an opportunity and also advised on how best to present their skills and aspirations by their headhunter is in an advantageous position when it comes to meeting the client. With that relationship in place, a headhunter can act as the champion of the candidate, playing matchmaker between two parties that desperately need to meet.

Headroom To Achieve…
In the current climate, headhunters aren’t redundant, they’re even more crucial. Headhunters have the expertise and the knowledge to help both clients and candidates alike find the next step on the road to success. Headhunters have the network to deliver the right skills and personality mix for a client’s most particular of requirements. Headhunters can help their candidates to maximise their potential and find where their expertise will add the greatest value. And choosing the right agency to partner with can make the difference between simply finding a good person for the job, or finding the best person for the job.

With thanks to those who responded to my question whilst researching this article on Linkedin.com.

Gi Lewis
Researcher
Firstperson Executive Search & Selection

End Of The Line?

2008-12-12T07:01:00.000-08:00

With the recession biting hard and operating conditions becoming more challenging, will sustainability slide off the radar of businesses as they struggle to maintain their position, deliver greater value for money, and cut back on all but the business essentials?

Given the challenging nature of the current economic climate, there is a likelihood that some will see sustainable practices as a non-essential activity, something to be cut back on to curb un-necessary expenditure. However, there are actually ‘many aspects of making a company sustainable that fit well with saving money and improving the efficiency of an organisation.’[1] With UK industry wasting almost £7 million a day on poor energy efficiency (source: The Carbon Trust), this is a major area for possible cost cutting during the downturn. The Carbon Trust estimates that UK businesses ‘could collectively save nearly £2.5 billion during the next 12 months, simply by implementing cost effective energy efficiency measures.’[2] And actually the signs are that for many, a sustainable way of operating is here to stay. Testing economic times means that cost savings and customer perception of a brand are even more important. And commitment to a green agenda seems to be gathering momentum in the IT sector.

Indeed, ‘there is no longer any need to prove the point that technology has a major role to play in reducing carbon emissions, not least since the publication of figures indicating that IT is responsible for two percent of global CO2, the same level as the headline-grabbing airline industry.’[3] According to a survey conducted by the organisers of Storage Expo 2008, ‘of the 513 organisations surveyed in the UK, 70 per cent said green IT and efficiency were still priorities, but with the provision that it must be saving them money.’[4] And that is the crux of the issue. In many instances, going green can actually save money, and in times such as these that is a valuable thing. Energy prices for businesses have already risen around 38% this year. In addition, those businesses that have spent the recent past ‘painstakingly establishing their credentials for corporate responsibility are not going to throw that away lightly.’[5]

For many businesses, the plethora of possible interpretations of the ‘Green Agenda’ is confusing, and just complying with increasingly complex and stringent legislation is enough of a task in itself. Patently, for a significant portion of businesses, the pursuit of an environmentally friendly policy doesn’t spring from an ethical belief. Of those surveyed by Storage Expo’s organisers, only 4% saw it as a priority if it didn’t bring cost savings. 10% said they were not pursuing a green IT agenda because of budget cuts, and 4% said it was never a priority. Outside of IT, increased regulations led by Government commitment to a more sustainable Britain, coupled with spiraling energy prices, mean that organisations are being forced to consider how they can cut energy costs and reduce their emission levels.

Energy costs form a large proportion of company expenditure, and minimising these costs through a sustainable approach will obviously help ease the pressure of the recession somewhat. For a large scale organisation, even implementing a policy of turning off monitors and lights when not in use would save a significant amount. Although in many cases there may initially be a significant investment required for a business to start down a more environmentally friendly path, the future savings of a well thought out sustainable strategy may more than pay for the decision, especially as restrictions are likely to become more stringent and energy costs higher. The Environment Agency’s new office in Bristol is a case in point (as you would expect). The building has been constructed to meet the Building Research Establishment’s Environmental Appraisal Method (BREEAM) ‘Excellent’ criteria. The design allows for rainwater harvesting, natural ventilation and solar power, which will cut the building’s costs by up to £180, 000 a year.

The second major reason for pursuing a green agenda for many organisations is the advantages of an ethical thread to their brand. As the crunch squeezes ever tighter, an ethical corporate stance is a fine way of differentiating yourself from the competition and attracting customers and talented employees. ‘Global sales of ‘environmental industries’ are estimated at $550bn (£280bn)’[6]; products and services with an environmental flavour have become big business, and so there is much to gain from aligning yourself with this trend.

There has become a fashion amongst some for green credentials- ‘according to some observers, too many of today’s occupiers [of new offices] are investing heavily in what has become “Eco-bling”- flashy but useless technology.’[7] It is those who are merely paying lip service to a green operation that are likely to drop the mask, whilst those organisations that have really taken sustainable processes to heart and have made that investment will reap the savings in the years to come.

The increasing cost of resources and the need to cut costs in a recession is likely to move businesses towards devising new products, services and process, and ways of thinking themselves out of problems. A by-product of this may be a drive to a greener operation. ‘A key shift we might see is from spending green to saving green’[8], affecting the mix of products and services which work best and yield the best return. A mounting raft of environmental legislation will force companies to tackle these issues to a certain degree. High energy prices and climate change are issues that are not going to go away. In fact, these problems are only going to become more acute. That the recession will force innovative cost cutting measures for many may unexpectedly move us towards a greener corporate future. ‘Wasteful behaviour by employees in office environments increases energy consumption by 20%, costing UK firms over £157m every year, according to the Carbon Trust Charity.’[9]

A spokesman from ExCel in London drew the following interesting comparison: ‘Let’s not forget that one of the key reasons that the recession is on us is thanks to unsustainable business practices, being too concerned with profiteering and not focused enough on balancing profit with social and environmental targets.’[10] Likewise, a spokesman from Friends of the Earth has this view: ‘Tackling the world’s environmental problems and surviving the credit crunch are not mutually exclusive. In fact, much of what needs to be done to prevent climate change and preserve the world’s finite resources will also help the economy and create jobs.’[11]

Gi Lewis

Firstperson Executive Search & Selection

References

1- Amanda Barnes (Chief Executive of Faversham House Group), quoted in Roythorne, Peter, CSR Vs Recession: Is Sustainability Sustainable, http://meetingsreview.com/news/2008/12/09/Is_sustainability_
sustainable%3F_#, accessed 17/12.

2- Unknown author, Credit Crunch Fails to Derail Green Agenda- UK Business Puts Energy Efficiency At Top Of Cost Cutting Priorities, www.carbontrust.co.uk/news/presscentre/220708_UK-energy-efficiency-waste.htm, accessed 19,12/08.

3- Unknown author, ‘Public Sector IT Can Lead Green Agenda’, in Computing, 21/2/08, www.computing.co.uk/computing/analysis/2210119/public-sector-lead-green-agenda-3837642, accessed 18/12.

4- Barker, Colin, Green IT Still A Priority Despite Credit Crunch, http://news.zdnet.co.uk/itmanagement
/0,1000000308,39515808,00.htm, accessed 17/12/08.

5- Grayson, David, ‘Will Corporate Consciences Crack Under the Credit Crunch?’, The Guardian, www.guardian.co.uk/environment/2008/oct/28/corporate-social-responsibility-green-business, accessed 17/12/08.

6- Jowitt, Juliette, ‘Green Business Boom is Set to Face Trial by Economic Downturn’, The Guardian, www.guardian.co.uk/business/2008/may/25/greenbusiness.
creditcrunch, accessed 19/12.

7- Thame, David, ‘Image Conscious’, in South West Business Insider, Vol. 2, Dec 08/Jan 09 (newsco-insider, 12/08), p.55.

8- Grant, John, What Might a Recession Mean for Green Business?, www.freshbusinessthinking.com/business_advice.php?CID=&AI
=703&PGID=&Title=What+Might+A+Recession+Mean+For+Green
+Business%3F, accessed 19/12.

9- Savvas, Anthony, Peer Pressure Fuels Green Agenda, Says Capgemini, ComputerWeekly.com, 24/10/2008, www.computerweekly.com/articles/2008/10/24/232815/peer-pressure-fuels-green-agenda-says-capgemini.htm, accessed 17/12/08.

10- “Mark”, quoted in Roythorne, CSR Vs Recession.

11- Michael Warhurst (Senior Resource Use Campaigner, Friends of the Earth), quoted in ‘Will The Green Agenda Survive The Credit Crunch?’, Packagingnews.co.uk, www.packagingnews.co.uk/news/865906/will-green-agenda-survive-crunch/, accessed 17/12/08

Winds Of Change

2008-10-17T07:00:00.000-07:00

These are challenging times for the insurance sector. As the ‘Credit Crunch’ tightens its grip and nerves begin to fray, there are likely to be higher numbers of claims and less new business. At the same time, a brace of new regulations challenges the way the industry operates. Even before the global crunch, ‘European Insurers were facing tougher times ahead: growth is slowing, earnings are declining and valuations have fallen.’ [1] Insurers find themselves operating in an increasingly competitive marketplace, with margins significantly narrowing. To remain profitable, insurers must improve efficiency, driving down their cost base at the same time as improving customer relationships. ‘The increasing competition and consolidation in the… industry is continuing to make product differentiation difficult, relegating insurance and other financial products to commodities often chosen on price alone.’ [2]

Technological changes also represent a major challenge- ‘much of the industry is technologically obsolete, even paper-based, which ties its hands when competing with new entrants into the business: better equipped banks and internet-based suppliers.’ [3] The future will almost certainly mean a move online, which requires a large initial investment, but reduces costs in the long run. Across Europe, sales online are growing ‘at a spectacular rate.’ [4] However, insurers have yet to witness a similar enthusiasm for online sales of their products. This must, and surely will, change. Also, as insurance companies interact with their customers relatively infrequently, the challenge is in making the most of these interactions- and as they increasingly move online, insurers will have to provide a personalised and high quality online experience which makes the customer feel valued and keeps them returning. Given the increasingly competitive marketplace and rising costs of acquiring customers, retaining profitable ones has perhaps never been so important.

Another major challenge to the sector at present is posed by significant regulatory changes. The UK already has perhaps the toughest regulations in the world. Indeed, a surfeit of regulation is identified as ‘the greatest risk facing the insurance industry’ [5] by the CSFI’s latest Banana Skins survey. And the FSA is due to reveal its Retail Distribution Review (RDR) before the end of the year, which will lead to some potentially very dramatic changes in the industry. Job losses and teething troubles are likely, as the role of those who sell insurance direct to the consumer is redefined, and the wider industry reacts to the stipulations of the RDR. Indeed, Andrew Strange (Policy Director of the Association of Independent Financial Advisers) has remarked that ‘The RDR is one of the biggest challenges our profession is currently facing.’ [6] The RDR is in part a reaction to the need for more regulation in the face of continuing bad press for PPI (insurance that covers someone in the event of illness, redundancy, etc to help meet their repayment responsibilities). PPI has long been seen as the cash cow of insurers. Will it cease to exist, at least in this profitable form? If so then the industry needs to find something to replace it.

Insurance is an increasingly competitive and complex marketplace. Over the past decade the market has exploded- more underwriters, more competition, more choice for consumers. This has led to increased innovation in service & products. Technology is playing an increasing part in this. Traditional methods of reaching customers and distributing products are changing. Mis-selling scandals, natural disasters and climate change, an ageing population, regulatory changes- all these factors make for challenging times for the insurance industry, which must constantly evolve as a result. And now as the economy slows many will cancel their non-compulsory policies. People are ready to cancel their life insurance before canceling their cable. This will be a big challenge for all providers- retaining, protecting and where needed replacing this income will be key. ‘The era of easy returns is over. Insurers are now competing in a much more challenging marketplace, and their valuations are reflecting that fact.’ [7]

The Retail Distribution Review (RDR)

Partially prompted by the ongoing bad press and mis-selling of PPI insurance, the FSA’s ongoing RDR is now set to publish its recommendations. As far back as 2005, the FSA called on firms to take urgent action to ensure their selling practices for PPI were in line with regulatory requirements, following a series of visits and mystery shops uncovering very poor selling practices and lack of proper compliance amongst a sample of firms. The RDR was launched in June 2006 as a response to recurrent problems in the market for the distribution of retail investment products. The review involves the FSA, industry, and consumer representatives working together. It incorporates the ‘Professionalism Group’, comprised of senior representatives from professional bodies and from the Financial Skills Council. The RDR aims to increase customer confidence in the market, so that customers will be more willing to engage with it more often.

The RDR will lead to new ways of thinking about how financial products are distributed in the UK, and is likely to initiate significant changes in the industry. In its RDR interim report of April 2008, the FSA sought to ‘make a simple distinction between sales and advice but suggested the term ‘Guided Sales’ could be used to cover the sale by firms of restricted financial products.’ [8] The concept of ‘Guided Sales’ is a process of educating the customer to the point where they can make an independent and informed choice of financial product, radically altering the current process. There would be a new distinction between ‘Sales’ and ‘Advice’ to enable this. The interim report set out a simple landscape for mapping retail distribution, based on 3 tenets:

1. Advice- There will be one type of adviser. ‘All advisers will be independent…, operating remuneration determined without product provider input and [the adviser will] recommend… products from across the whole market.’ [9]

2. Sales- These will be ‘strictly non-advised services. These services are intended to encourage higher levels of savings and protection so that the needs of more consumers are met.’ [10]

3. Money guidance- a newly proposed impartial information and guidance service, in partnership with HM Treasury.

The FSA’s interim report also unveiled 3 specific challenges to the industry:

1. A challenge to product providers to change their business models so they do not determine how much advisers are paid.

2. A challenge to the industry to develop and implement an agreed common framework for professional standards (for advisers).

3. A challenge to present propositions to the FSA for new sales services and to make the case for FSA action to help implement these ideas in a way that delivers outcomes for consumers.

This ‘simpler future landscape’ [11] has the ‘potential to deliver greater clarity for consumers and could lead to a material increase in the levels of consumer confidence in the advice sector’ [12], putting in place a clear distinction between ‘Advice’ and ‘Sales’. ‘Advice’ would be restricted to those who can meet a step change in standards and who are ‘acting as an agent of the customer.’ [13] Everything else would be ‘Sales’. ‘The only advice would be independent advice- again, simplifying the consumer’s view of the market, making it more intelligible and enabling customers to make independent but informed choices- a key point of the RDR.

This would also help achieve the stated aim of stopping product providers playing any part in the determination of advisers’ remuneration, ‘removing the potential for provider-led remuneration to result in bias.’ [14] Furthermore, the RDR’s separation of ‘Sales’ and ‘Advice’ means some significant changes in the way the products are distributed, not least for those advisers who currently play a combination Sales/Advice role in this space. Many will need to undergo further training and make a move into the ‘adviser’ space, others will find themselves classified as ‘sales’ or else forced out altogether.

Of course, all this is quite a challenge, and the FSA acknowledges that there will be ‘transitional issues’ [15], specifically around professional standards, remuneration, and business models. Some embrace the changes- a recent report by AT8 shows that many IT vendors have realised the potential opportunities awaiting and are already responding to the review, and ‘investing in enhancing their solutions to meet the needs of the post RDR world.’ [16] The survey showed 47% of IT vendors confirmed investing already in adapting and enhancing their solutions to meet these potential changes. 73% of vendors thought the RDR would positively impact the industry, benefiting the market and consumers.

Mark Thelwell, Director at AT8 Group commented, ‘The RDR proposals not only force existing distribution channels to review their business models and processes but also bring to the foreground new automated sales channels such as direct to consumer websites from existing providers, distributors, and new entrants.’ [17] This obviously presents a wealth of opportunity to IT suppliers, as it will mean large changes to the technology already in place. Focus Solutions CEO, Richard Stevenson, suggests that the ‘advice process is being turned on its head, with an adviser no longer providing an interrogation and analysis method, but instead giving a client the knowledge to make an informed choice.’ [18] The company is currently developing a variation of its Focus:360 software to meet the proposed guided sales model in the RDR. Fidelity is considering providing ‘Guided Sales’ tools for consumers wanting access to products. Opinion seems divided- some believe that ‘Guided Sales’ could help facilitate providers offering more products direct to consumers; some are more critical, suggesting the move will only confuse customers further.

Sacrificing the Cash Cow?

As has been previously noted, a principal reason for this increased regulation is the near-constant bad press and mis-selling of PPI. A spokesman for the Financial Ombudsman Service (FOS) said ‘PPI complaints have risen 10-fold in the past two years, and are now about 25% of all the complaints we get.’ [19] Consumer organisations (such as Which? and Citizens Advice) have criticised the insurance as ‘useless and little more than a profitable protection racket for the banking industry.’ [20] The FSA has already fined 11 financial organisations in the past two years for mis-selling PPI, as well as introducing tougher rules on how PPI could be sold earlier in 2008.

Providers are overcharging borrowers taking out PPI by over £1.4billion each year due to a lack of competition at point of sale and through the practice of selling PPI at the same time as selling a loan. This is likely to be banned as many customers felt that they would be refused their loan if they did not take out the insurance. An FSA mystery shopping exercise found providers still failing to fully explain flaws in the products. ‘According to Which?, the success rate for claims on PPI is a miserable 11% and most PPI holders would be better served spending their money on more comprehensive cover, such as income protection.’ [21] Doug Taylor of Which? has said that ‘Credit Card PPI is a modern day snake oil- it’s a useless product, expensive and poorly designed.’ [22] The FSA’s investigations identified a risk of inappropriate sales- a large proportion of firms surveyed failed to take reasonable steps to ensure customers did not buy policies on which they could not claim or which only provided very limited cover.

The FSA concluded that advice on PPI was likely to be poor, and there were inadequate controls in place for non-advised sales and provision of advice or information amounting to giving advice. They also identified that there was an over-reliance on documentation supplied to customers rather than explaining the product orally, and that the way that sales staff were incentivised encouraged mis-selling. In addition, training and competence of sales staff was not adequate. These findings led to a move to increase intervention into PPI sales.

Possible sanctions include financial penalties, stopping offending firms from selling PPI, and action against individuals. To try and combat the common situation that there is limited opportunity for customers to search for alternatives or switch products and that there is a considerable point of sales advantage for providers, the Competition Commission is also suggesting that PPI is not available at point of sale and distributors may have to wait up to 90 days to sell it on to their customer. It also recommends price caps on PPI and that all policies be renewed annually.

However, there would likely be big repercussions if PPI is stubbed out. David Willcock, heading up the Consumer Banking practice within Firstperson, notes that banks earn considerably more on the PPI than they do on the APR. If the new regulations prevent providers from selling the loan and the protection offer at the same time, ‘this will mean that banks would need to find millions of pounds of income to replace this. Replacing PPI with other GI products isn’t necessarily the answer, as they’d need to sell millions of policies to recoup the income.’ The Association of British Insurers says that the insurance industry has been working hard to improve sales of PPI, and in the current economic climate, it seems consumers will still buy PPI out of fear.

Supermarket banks are likely to be well placed- ‘they have an existing distribution network (stores) and don’t have the back books the banks have, and they aren’t as reliant on the income from PPI. Financial Services is only a suite of products they offer- they can afford to go more competitive on rate and compete with the high street banks’, David notes. In his view, next steps for the banking industry has to be ‘more customer segmentation- [the retail banks will focus on] two key levels. [Firstly]… customers who will buy from the bank because they trust the brand, don’t have time to shop around, and pay a slight premium so they can have peace of mind for when they need to make a claim. Secondly there are established customers who will have banked with them for years, they’ll take the branch manager’s recommendation and take the product (customer advocacy).’

The Road Ahead

To compete and survive, insurers need to reduce costs- and develop or migrate to lower-cost operating models. This would probably include an increase in online activity. Although this requires significant upfront costs and is complicated to implement, it should prove rewarding in the long term and increase efficiency. Whilst internet-based comparison sites such as Moneysupermarket.com are becoming ‘increasingly popular for cross-provider and cross-product research purposes’ [23], they do not appear to have boosted online sales so far. ‘The experience of many providers is that 80-100% of customers will research their products extensively via their websites, including quote generation, but revert to the telephone or an agent at point of sale.’ [24] The reason for this is that ‘advice remains central to the insurance sales process… and has become engrained in customers’ buying behaviour.’ [25] Perhaps this will shortly be forced to change. A key challenge for insurers will be in evolving the internet from ‘a complementary channel for customer communication and distribution’ [26] to a sales channel.

The internet cannot offer the specific and personalised advice that an actual person can- the challenge for providers is in overcoming their own reluctance to take this on, and develop more sophisticated online capabilities. The growth of success in the internet channel would likely further the decline of the role of the intermediary. This is another reason for the slow uptake of the internet as a sales platform, as advisors are reluctant to push customers in this direction. However, the internet has the potential to radically change existing distribution and communication methods, driving down costs and potentially reaching a wider market.

The fact that customers are sceptical about buying online because they feel the need to speak with someone before making their decision reinforces the impression that many lack confidence in their product knowledge and understanding. Customers are reluctant to buy these kinds of products online because they think they need advice.

The RDR’s aim to make the market more intelligible for the customer, and to boost their confidence in their own understanding, might have a knock-on effect of increasing online sales. Meanwhile, the draw to the online realm is inexorable. Consumer banks and general retailers have already made significant moves towards online sales and servicing, putting pressure on the insurance industry to follow. ‘Traditional distribution models are becoming uneconomic, thanks to fierce price competition and the mounting administrative burden of regulation.’ [27] Meanwhile, the benefits of online channels are obvious. Insurers have a clear choice- they can stick with the traditional model (which limits investment costs, but keeps distribution, servicing and cost communication costs high in comparison with online competitors), or they can develop an online model. If this becomes the norm, then the current role of intermediaries will diminish.

The successful firms will make strides into new, higher growth markets. In the ultra competitive environment they operate in, firms are unlikely to win new business market share from their competitors, except at woefully low margins. To survive, many insurers will have to find new markets- increasing their presence in Europe or perhaps even further afield, such as in India or Asia.

The FSA sees that as a result of the recommendations of the RDR there will be big changes within the sector. ‘Product providers may need to change their approach to compete for distribution more on the basis of quality and price of their products than currently, and this could significantly alter the design of their products.’ [28] As we await the final proposals of the RDR, it is clear that ‘whatever the eventual shape of the new regulation,… the relationship between manufacturer, distributor and consumer is about to change.’ [29] Clearly, interesting and challenging times lie ahead.

Gi Lewis

References

McManus, Richard and Helge Fredheim, “The End of the Golden Age: Rising to the Challenge”, in PA Perspective on European Insurance (PA Consulting Group, 2008), p2.
2 Unknown author, Enterprise Personalization for the Insurance Industry, (Exstream Software White Paper, 4/04), p.1 http://research.pcpro.co.uk/viewer/viewDocument.do?accedId=
8312209, accessed 16/10/08.
3 Unknown author, ‘Too Much Regulation’ Tops Insurance Risks, www.ukmediacentre.pwc.com/content/Detail.asp?ReleaseID=
2350&NewsAreaID=2, accessed 16/10/08.
4 Rumsey, Martin and Nina Korfu-Pedersen, “Unleashing the Internet: Follow the Customer”, in PA Perspective on European Insurance (PA Consulting Group, 2008), p.14.
5 ‘Too Much Regulation’ Tops Insurance Risks.
6 Andrew Strange, quoted in Westacott, Gemma, Aifa Hosts Web Chat on RDR, 26/9/08, www.ftadviser.com/FTAdviser/Advisers/Industry/TradeAssociations
/News/Article/20080926&5acfefo-8be5-11dd-649c-00144f2af8e8/Aifa-hosts-web-chat-on-RDR.jsp, accessed 16/10/08.
7 McManus and Fredheim, “The End of the Golden Age”, p.4.
8 Lander, Edward, Old Mutual Attacks FSA on ‘Guided’ Sales as Skandia Sales Fall, 8/5/08, www.citywire.co.uk/adviser/-/news/market-and-shares/content.aspx?ID=302750&page=2, accessed 16/10/08.
9 Unknown author, Retail Distribution Review- Interim Report, (FSA, 2008), p.2.
10 Ibid.
11 Ibid., p.3.
12 Ibid.
13 Ibid., p.8.
14 Ibid., p.17.
15 Ibid., p.26.
16 Unknown author, Technology Vendors Rise to the Retail Distribution Review Challenge (Press Release, 1/10/08), www.bobsguide.com/guide/news/2008/Oct/1/Technology_
vendors_rise_to_the_Retail_Distribution_Review_challenge.html, accessed 16/10/08.
17 Mark Thelwell, quoted in Technology Vendors Rise to the Retail Distribution Review Challenge
18 Unknown author, Focus Develops ‘Guided Sales’ Software, 3/10/08, http://www.ifaonline.co.uk/public/showPage.html?page=ifa2006_
articleimport&tempPageName=818238, accessed 16/10/08.
19 Quoted in Pollock, Ian, PPI Sales Face New Restrictions, 10/09/08, http://news.bbc.co.uk/go/pr/fr/-/1//hi/business/7608056.stm, accessed 16/10/08.
20 Ibid.
21 Montia, Gill, “PPI Successful Claim Rate A Miserable 11%”, Insurance Daily, 22/09/08, www.insurancedaily.co.uk/2008/09/22/ppi-successful-claim-rate-a-miserable-11/, accessed 16/10/08.
22 Unknown author, PPI Still Mis-Sold, Says Which?, 09/09/08, http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/7606249.stm, accessed 16/10/08.
23 Rumsey and Korfu-Pedersen, “Unleashing the Internet”, p.14-15.
24 Ibid., p.14.
25 Ibid., p.15.
26 Ibid.
27 Ibid., p.16.
28 Unknown author, Retail Distribution Review- Interim Report, p.12.
29 Unknown author, www.altus.co.uk/consultancy/themes/rdr, accessed 17/10/08.

Small Fish, Big Pond

2008-08-11T07:00:00.000-07:00

Within a crowded marketplace filled with organisations of varying size, how do you choose who to engage on the next important project? A plethora of companies jostle for position in every sector, each trying to differentiate from their competitors.

The advantages a large organisation can bring are obvious- resources, reach, reputation-, but in many instances it can be beneficial to use a smaller company. So what are the advantages of using a small company over a larger one? For starters, a smaller company is more likely to go the extra mile to ensure they deliver for you- ‘small businesses know that their livelihood is based on their customers.’[1] For a small company, such as Firstperson Executive Search & Selection, each piece of work really matters. There is no such thing as a standard assignment or a standard process. A small company is adaptable enough to treat every case as different, tailor its service to fit the particular needs of the client and of that particular assignment, and offer a personalised, consultative service. Of course, ‘big businesses and corporations are important- we need them and their economies of scale, and of course they can do things that small businesses cannot’ [2], but there are also many things that small businesses can do better. A potential customer has to take this into account when selecting who to engage- what kind of service do you need?

As with many small organisations, Firstperson is a small fish in a big pond stuffed with bigger fish. As in nature, small fish are vital- ‘small businesses create two of every three jobs’[3]. And being a small fish has its distinct advantages. Big fish take a long time to maneuver- ‘because of their [inflexible] policies and procedures, because they have to go through such a lengthy chain of command, large businesses often take an extended period of time to react’ [4]; a smaller fish is more agile- and is adaptable enough to reach niches that its larger cousins cannot. Smaller, more flexible organisations have the determined and innovative approaches that allow them to reach a particular niche. Smaller companies have to be determined- they thrive on innovation, and they have to have the bravery to adapt to survive. By way of illustration, Firstperson doesn’t just rely on databases and stock approaches as many of its larger competitors may. The structure of the company encourages the generation of new ideas and new methods of completing assignments. Innovative solutions and decisions can be acted on very quickly, and because successful delivery is so crucial, a smaller company will take the time to really partner with their client, and listen, and can take a consultative stance based on their particular specialism.

A small company depends on its employees- ‘everyone needs to be at the top of their game’[5] because each member plays a vital role. One of the potential problems with larger organisations is that ‘it’s a lot easier to hide bad performers at a big company.’ [6] ‘Apathy doesn’t breed nearly as well in small businesses… small business owners and their workers are focused and immensely proud of what they do.’[7] In addition, ‘large corporations are usually the ones with the weakest customer service.’[8] They have so many customers that it is impossible for them to give them their full and undivided attention, and it can be difficult to get in touch when you need to.

‘It is not easy for small companies to win contracts against larger competition’[9]- but it is possible through offering a unique and compelling proposition and through demonstrating a reliable and incontestable track record. Small companies have to ‘be the same as… [their] competitors and yet at the same time different’[10] , with as many unique features and functions over competitors as possible- at the same time as matching what a larger competitor offers. Smaller companies offer more specialised, personalised services where quality of service and innovative approaches are paramount. Although many solutions can be offered by ‘off the shelf’ products and services, clients often have specific and unique requirements that require a more customised and flexible approach. With attention to detail and more focus on the individual nature of the project, a small company can satisfy this requirement. Their employees are dedicated, innovative, and have to constantly be on their toes. This is not to say that this cannot be true in larger organisations as well, but it is common that ‘innovative small businesses are prize targets of larger corporations that often find it more cost effective to acquire than to innovate on their own.’[11] In addition- ‘small business is not a synonym for small earnings.’[12] Many small businesses are very profitable. ‘Their advantage of leanness, maneuverability, innovation and customer focus mold them into steady enterprises.’[13]

A potential client may have concerns that a small company might not deliver. Firstperson do: we have worked on difficult assignments for blue chip clients and delivered tangible results and influenced our clients’ thinking in the process. These successes are detailed on our website.

Successful companies start off small- if successful, they grow. Recent global success stories such as eBay and Mozilla (with only c. 60 employees) illustrate this. The challenge for the successful small company is in preserving those small company values and systems that made you so special in the first place, whilst at the same time taking on board the new methods, capabilities and advantages brought on by growth. Is it possible to be the best of both worlds?

Gi Lewis

References

Wilson, Dr Ralph F, ‘Small Business Benefits’, http://www.enetsc.com/doctorebiz.htm, accessed 1/9/08.
2 Ibid.
3 Ibid.
4 Thackston, Karon, ‘Small Business: Being Small Gives You Advantages’. http://www.insiderreports.com/department.asp, accessed 1/9/08.
5 Bhan, Niti, ‘Point & Counterpoint on Big VS Small Size’, Does Size Matter, http://sizematter.blogspot.com/2005/09/, accessed 1/9/08.
6 Ibid.
7 Wilson, ‘Small Business Benefits’.
8 Thackston, Karon, ‘Small Business: Being Small Gives You Advantages’.
9 Unknown author, ‘Small Agencies Take On The Big Boys’, www.highposition.net/news/small-agencies.html, accessed 2/9/08.
10 Ibid.
11 Wilson, ‘Small Business Benefits’.
12 Ibid.
13 Ibid.

Gi Lewis

A Star on the Rise

2008-04-11T06:59:00.000-07:00

Despite it only being on the mass populace’s radar for a relatively short time in the UK, a boom in Islamic lending is expected this year, following the government’s continued support for the Islamic finance sector. The development of new Islamic finance products is a massive growth area currently, meaning that Britain’s burgeoning Muslim population will have access to a wider range of alternatives than ever before. The government’s commitment to supporting this area, as laid out in the recent budget, is likely to encourage more Muslims in the UK to start seeking out Halaal financial alternatives to traditional financial solutions.

Shariah-compliant products forbid the giving and receiving of interest (which prohibits traditional mortgages and loans). Wealth should be generated only through legitimate trade and investment in assets, and the Islamic financial model works primarily on a risk-sharing basis between the customer and the bank, who then divide any profits between them. This area is undergoing a huge explosion in popularity currently, driven in part by high-net worth individuals from the Middle East as well as an increasing middle class Muslim population in the West. A report by consultancy firm Accenture published earlier this year forecasted that ‘the market’s global value will increase by £5.1bn at present to £18bn in 12 years’ time.’ This relatively new area of the market is offering exciting new opportunities for the UK banking sector; a golden vista previously largely untouched is now becoming increasingly sophisticated and competitive.

In February, European Financial House (which is a subsidiary of Qatar Islamic Bank) became the fourth wholly Islamic bank to operate in the UK, and more are sure to follow.

Humphrey Percy, Chief Executive of the Bank of London and the Middle East (BLME) notes that ‘Islamic finance is becoming very much more mainstream and influential…. We have seen increasing interest in Islamic financial products, not only from Islamic institutions, but also from conventional financial institutions and consumers, which is likely to stimulate growth in the months to come.’

This forward looking view is also shared by LloydsTSB, which has been catering for British Muslims’ financial needs since 2006 and now offers a fairly wide range of products complying with Islamic law. Increasing demand means that the bank has now ‘launched a Shariah-compliant version of the account used by all banks to distribute payments to customers,’ allowing persons and businesses that receive payments from abroad the safe knowledge that the money can be handled according to Islamic law all the way along the line.

Dr Humayan Dar, honorary fellow at Cass Business School, notes that the growth in Islamic finance occurs more in investment banking than on the retail side of things, although he does acknowledge there is some demand for consumer products. Dar sees that the burgeoning demand is not as much as analysts perceive it to be, and comments that ‘Over the past two years…. some existing customers have stopped using these products…. and have gone back to conventional products.’ Dar also notes that there is a gap in the market for financial solutions aimed at small to medium sized Muslim-owned businesses.

It seems that over the coming months, Islamic finance will become increasingly popular and ever-more visible as banks begin to offer more and more numerous and increasingly sophisticated products to the market.

Quotes and information taken from an article ‘Interested Parties’, written by Mapara Syed and published in Credit Today (April 2008, Athene Publishing), p.21. www.credittoday.co.uk

Gi Lewis