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
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
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.