When the IT
director of Newcastle-based financial services company Positive
Solutions’ left the company in January 2005, the firm did not
recruit a new person to the post. This decision could have been
interpreted as downplaying the IT function in the business: the
reality is quite the opposite.
IT forms the
single largest department at the 48-person Positive Solutions head
office, with a quarter of staff there engaged in development and
support. And according to head of IT development, Richard Clarke,
putting the internet and innovative software at the forefront of
the business has allowed Positive Solutions to “wipe the floor”
with its competitors
The company,
formed in 1997, claims its £275m market valuation is greater than
its eight nearest competitors’ put together. “All our competitors
are losing money,” asserts Clarke, “and that’s because we have put
technology at the centre of creating an entirely new business
model.”
So, what does the
company do and how has it come from nowhere to market leader in
less than a decade? Well, Positive Solutions is an IFA firm – a
company that mediates between independent financial advisers and
the institutions that provide financial products – which claims to
have revolutionised the way that business operates by using tablet
PCs, 3G communications and bespoke software, to make itself far
more efficient than its competitors.
How has it done
this? “Financial services have historically been a paper and person
heavy process,” says Clarke, and it’s the removal of these
paper-based processes which lie at the heart of what Positive
Solutions has achieved. Selling financial products is a heavily
regulated process. When financial advisors sell something they are
bound by the financial services regulator to be able to demonstrate
they have made all possible efforts to determine the client’s
suitability for the product they sell them – the ‘fact’ find’ - and
that they have given them a choice from the widest possible
selection of suitable products, within certain limits.
Once the client
has selected the product they want, the IFA has to start the
process of applying to the provider on their behalf. Once they are
accepted and the policy is issued, the IFA must track commission
received on a regular basis for each of hundreds or thousands of
clients.
What Positive
Solutions has done is to create, from start to finish, an
electronic life cycle of selecting and managing financial products.
This cuts out huge amounts of paperwork in the process of mediating
between the firm’s 1,300 IFA clients and between 600 and 800
financial product providers.
“Traditionally the
fact find is handwritten and taken back to the office to be keyed
in manually. Now we use data capture at the point of sale.
Applications and acceptance of policies was done by post and the
process of tracking commissions was a nightmare – an IFA would have
thousands of small amounts of commission coming through on a
regular basis from the institutions and it would arrive in one big
cheque which someone had to reconcile,” explains Clarke.
The firm’s IFA
clients are equipped with tablet PCs with Positive Solutions’ own
Intuitive software. This connects to the company’s in-house
developed core system, which in turn links to the product
providers. The fact find is now done electronically and Positive
Solutions can show clients the results of a search for suitable
products on a tablet PC.
Once clients are
happy with their selection, the application is then made to the
product provider. Then, between the application being made and the
product becoming live, the IFA has to track often quite lengthy
processes, such as the provision of medical reports. Intuitive
allows the IFA to track this ‘pipeline’ part of the process on a
personalised extranet from their tablet PC.
Once the policy is
accepted and is ‘on risk,’ the IFA has to keep track of incoming
commission payments on a regular basis. Where once the IFA had to
carry out time consuming detective work to reconcile lump sum
cheques containing hundred of payments of a few pence, Positive
Solutions now receives detailed breakdowns of commission payments
from providers by EDI and presents them to the IFA through their
account.
“The whole process
has been cut from weeks down to hours,” says Clarke, “and some of
our clients say they’ve been able to do the work with 60% fewer
staff than they used to.”
“Another part of
the process is servicing the client. Before, you could perhaps
expect a letter once a year. The whole thing was pretty opaque and
you had no idea of day to day changes in the value of your pension
or other investments. Clients now have access to an online
portfolio so they can get real time policy values.”
It’s a simple
enough model but how has Positive Solutions risen so quickly in
such a short space of time?
“We’re wiping the
floor with the competition,” insists Clarke. “We brought a new
model to the industry and we have had our emulators but they’ve
failed. We were formed as a company that put technology to the
forefront of what we do and are single minded about ensuring we use
technology to stay ahead.”
With Clarke you
get the sense of an IT man who is at one with the aims of the
business. That’s no surprise since the use of the internet as an
enabler of business was central to the establishment of the firm in
1997.
That ethos comes
from David Harrison, chief executive and founder, who was formerly
a director at Allied Dunbar and a champion of the use of
technology. Having spent some time working with consultants
McKinsey and embraced management guru Eli Goldratt’s thinking, he
came to the conclusion that Allied Dunbar needed re-engineering as
a company, with a flatter management structure and technology at
its core. They said ‘no thanks’ to Harrison’s ideas; instead he
formed Positive Solutions.
Ever since
formation, IT has been at the core of the business and according to
Clarke, who began his IT life as a self-taught web developer, the
philosophy of the company is to get the best IT people possible to
turn business vision into programme-level technology. “We don’t buy
off the shelf and we don’t outsource. We don’t have legacy systems
as we always sweep away the old when we do upgrades,” says Clarke.
“Legacy systems introduce inertia so we always try to proactively
tackle change and bring it about quickly with the aim of not
disrupting the end user and making it easier for them to do what
they have to do.”
At present the
company’s IFA clients use 1,300 3G-enabled Fujitsu tablet PCs –
though negotiations are in progress with another supplier to
replace these. At head office, hardware is Dell on the desktop plus
Dell 3.6 Xeon servers running 4 Gigabytes of RAM. The firm has 3.5
Terabytes of data on an EMC/Dell SAN mirrored off-site in
Edinburgh, which is set up for 8 Terabytes total capacity.
On the software
side, the core applications – the adviser-facing software Intuitive
and the nameless head office system - were developed in-house and
handle everything from initial data capture to mediation with the
providers. Underlying them is an 11 Gigabyte SQL database. The four
to five sackfuls of letters the firm receives each day are scanned
in and presented to the appropriate applications using an in-house
developed system.
Positive Solutions
uses the VB.net development environment with .net web services XML
(with XLST translation) to link the various elements of the core
systems. The company is currently rolling out the second iteration
of the Intuitive software.
The high
motivation of staff is also explicable by more tangible factors. In
2002 60% of the company was taken over by Dutch insurance giant
Aegon. All staff has shares and there is an agreement for Aegon to
buy the other 40% in 2006. IT team members have a great incentive
to keep the company on track as they stand to make up to £150,000
each from those shares.
With an ethos that
puts IT at the centre of what they do and delivering a product its
clients are clearly satisfied with, the company has made itself
market leader in a short space of time. Why doesn’t the competition
do likewise? According to Clarke the regulatory environment is
preserving inefficient companies and disincentivising change.
Financial advisers
can be tied to a single firm, to no firm – as is the case with
Positive Solutions’ model - or they can be tied to a limited number
of firms. Most of the firms’ competitors are single or multi-tied
and are effectively subsidised by institutions to provide exclusive
channels to the customer. “We’ve proved the existing model is
uneconomic,” says Clarke. “Some of our competitors are losing
£20m-£30m a year. It’s not a viable economic model and they only
exist because the providers pour money into them. They’re
staff-heavy and inefficient, don’t provide a good service and can’t
afford to emulate what we’ve done.”
By hard work and
circumstance, Positive Solutions has made great advances since its
formation. But business never stands still, so what of the future?
“We intend to be the largest IFA firm in the country within a year.
We want to make more of our brand and leverage our reputation for
servicing clients,” says Clarke, “and there talk of moving towards
providing software on an ASP basis.” It all goes to show how far
you can get without an IT director.