Net inflows to specialty platform providers (SPPs) like Netwealth have largely been driven by technology and service standards rather than the prospect of lower fees, Mr Chidgey said in a media briefing.
That leaves them open to disruption by new entrants who can provide service at a better price point.
“We’ve seen a number of new platforms spring up in the last six to 12 months,” said Mr Chidgey.
Chief among those new platforms is Centric, a wrap platform that is backed by FNZ, a global third-party administrator with $500 billion in FUA.
That scale allows them to offer Centric at an “unprecedented” price point – a fixed dollar base administration fee of $369 per year, equating to 7.4 basis points for a $500,000 balance, halving to 3.7 basis points at $1 million.
“In aggregate, the fee proposition is quite materially different to what we’ve seen in the past,” Mr Chidgey said.
And Mr Chidgey predicts that Centric won’t be alone. Avaloq and Temenos, both based in Switzerland, as well as Bravura, could both make serious inroads into Australia.
“The specialty platforms who make predominantly 100 per cent of their earnings from wrap platforms are most exposed,” Mr Chidgey said.
“The traction they’re enjoying in terms of fund flows at the moment is unlikely to change rapidly in the next six to 12 months, but obviously as advisers become more aware of some of the price offerings of new platforms like Centric, I do think we’ll continue to see that frontbook price point be down over the next 12 months.”
Major providers could also feel the heat.
If IOOF completes its deal with ANZ Wealth, the company will be doubling up on platforms at a time when it could be facing greater challenges, exposing up to 70 per cent of its earnings to disruption by other providers.
“Our view is gradually morphing towards questioning whether or not the big platforms, in three to five years’ time, will be running their own back ends in terms of administration or whether we will have these third-party administrators providing a much lower price point to the consumer enabled by global scale that is on a different level to what we’ve seen previously,” Mr Chidgey said.
Most threatened will be the industry funds who push their price competitiveness and fail to disclose all costs and their ruse of marketing superior returns based on apples and orange comparisons will not be allowed to last forever. The irony is that they will struggle to maintain any level of customer support due to the weight of customer numbers drawn in by their false promises.
You must live in an alternate world.
When I look at PDSs in the last couple of years now actually showing in fuller detail the “indirect” costs as they like to call them ….borrowing costs, property costs, transaction costs like the “buy/sell” costs they pretend they don’t charge …. when you actually add these up I see many of the default funds with 0.76 – 0.80 MERs. This blows away any saving on the admin side, and of course many Industry Funds charge like wounded bulls once in the pension phase – still many have no caps, no linking between accounts and couples. One PDS has the same fee disclosed twice – very confusing trying to ensure you add the extras but don’t double count … they have some of the indirect costs in the main MER and then repeat that element again in a second table with a footnote that part is already counted. So complex. And if I hear one more industry fund staffer saying …”CGT what is that … no our members don’t pay that” I will scream ….. all members are being affected by the decisions of every other member …. next GFC as they all sell-up in a panic and the tax is passed on to all the other members ….. it is not right ….. hopefully Kenneth Hayne will also put an end to falsely moving returns into reserves to “pump up” later bad year returns . Pooled Super Trusts should be under the eye of regulators, not just retail funds.
That all sounds really interesting. You should write an article !
“Allows them to offer Centric at an “unprecedented” price point”.
One wonders if Mr Chidgey included all the other costs in his report to give a true apples for apples comparison, given that the Centric MDA offering is a Centric/Findex product with a suit of “own” funds included in the mix.
Who said vertical integration was dead?
have a look at Macq’s new offer. Its a race to the bottom finally!
Macquarie’s new offer has only got a few investments on their menu. It’s an offering available only for small balance clients as per their PDS.
Whoever offers a longevity risk solution will win big time.
– Advisers must recommend products with ‘features’ that satisfy the best interest duty
– Retirees are all worried about outliving their assets
– An investment linked annuity solves that ‘longevity risk’ and keeps the FUM in their investment choices.
– Government is pushing hard for longevity products as the investment linked ones increase retirement income up to 30%
sorry, how is it that an investment-linked annuity solves longevity risk?
Well, if you’re a superannuation trustee it goes a little something like this: Buy ports, monopolies, airports, toll roads, office blocks and basically anything with yield. Package that all up in a big old “Direct Assets” or “Private Assets” fund, slap 30% of you balanced portfolio in it, because you can use half your property and half your equity allocation to it, then wait for the SGC to roll in and fund the outflow. Capiche?
I did notice Vicsuper have just launched 2 annuities but you can’t get as an adviser any projections or illustrations – your client has to go to a sales meeting with their planners to get info, to ask Qs they don’t know, to get answers they aren’t familiar with understanding. It is apalling. How is an adviser meant to reasonably consider these options? ASIC …. APRA ,,,FASEA …AFAC …. where are you?
Hi Anon –
The Guaranteed Income account is invested in a life policy (Policy) issued to VicSuper by
Challenger Life Company Limited
Basically, the trustee will take out a life policy with Challenger – the rates will be analogous to what is on the challenger website.
The reason why they want you to go to a meeting is because VicSuper sells financial planning consultations. They don’t want to do business with you as the adviser.
https://www.challenger.com.au/personal/products/payment-rates/lifetime-annuity-payment-rates
The current payment rates on a 100% withdrawal after 15 year investment is about 2.9%
competition is good – evolve or fall by the wayside –