FDS creating confusion but also opportunities

The survey by financial planning software provider Midwinter, completed by 320 predominantly mid-tier and boutique group advisers, found less than half were very confident they would be able to create the documents come the 1 July implementation date.

One fifth did not expect to be ready by the implementation date, and only 22 per cent were ‘very confident’ they knew what would be required for inclusion in a FDS, with 13 per cent ‘not at all confident’.

Midwinter managing director Julian Plummer said this is a “huge concern” given it is only three months away.

Only 27 per cent were confident they would be integrating their FDSs with data feeds from a commission system such as EasyBroker or Commpay, with 39 per cent unsure and 34 per cent not planning on integrating.

“So 34 per cent will be doing it by hand, which is a rather scary proposition. It’s not easy and if you have a couple of hundred clients it’s going to take a long time,” Plummer said.

The survey also asked if advisers implemented a client segmentation model. Thirty five per cent did for all clients, while 28 did not use one at all.

“The reason we ask this is because in an FDS, along with the fees, you have to disclose what services you are going to provide and what services you did provide,” Plummer said.

Advisers who are able to categorise clients by gold, silver and bronze, for example, could then use that when drawing up an FDS to prepopulate what services they would be expected to provide.

“We wanted to build a [Future of Financial Advice] system that’s good for advisers that may or may not have a client segmentation model. A client segmentation model takes a long time to get up and running, and it doesn’t apply to everyone,” Plummer said.

Some current software FDS solutions will rely on a client segmentation model but that means around two thirds of advisers won’t be able to use them, he added.

Being forced to meet FDS requirements may also force advisers to better segment their client base, which could have a flow-on benefit to productivity. A recent Business Health/Securitor white paper analysing more than 300 planning practices found those implementing an effective segmentation model were three times more profitable than those with no client segmentation model.