Using technology to unlock value for advisers and clients

Advisers and their clients are looking for value in the form of product efficiencies and price, but increasingly it is innovative product solutions which are driving additional value.

Advisers deliver value by utilising innovative product solutions as well as the strategic advice they provide to help maximise client outcomes. In the prevailing low-yield environment, it is this value creation which is becoming increasingly important.

HUB24 is using technology to create value for advisers and their clients and in doing so, is shaping the future of product solutions in the financial services industry. With managed portfolios at the heart of its offering, HUB24 has positioned itself ahead of the market in creating best of breed investment solutions that enable advisers and their clients to create value beyond simple asset selection.

Backdrop of change

The Australian financial services industry is quickly evolving with the dislocation in the advice industry: an engine room for change. Driven by customer demand for unconflicted advice, advisers have put more pressure on licensees to open up their Approved Product Lists (APLs) to provide greater investment choice and to help meet compliance expectations.

In a white paper published by HUB24 earlier this year and based on the feedback from 300 advisers, CoreData found 57.2 percent of aligned advisers said they believed having an APL made it more difficult (49.5 percent), or impossible (7.7 percent), to meet best interests duty requirements.1

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Advisers are also actively seeking out new licensees and making decisions about their future business partners as they take a best-of-breed approach to product and service providers. This activity is expected to continue while financial advisers seek to build the optimum business model to service the needs of their clients. 

More than competitive fees

HUB24’s flexible technology enables advisers to add value to the advice they deliver and to customise their platform solution to fit their business and their clients.

HUB24 has developed platform technology that provides transparency around clients’ individual tax outcomes and to estimate and to model tax outcomes and capital gains tax (CGT) impacts. A choice of tax management approaches including minimum gain, maximum gain or first in, first out provides advisers with greater flexibility for their clients as does optimising tax outcomes through sale of specific assets.

With effective tax management fast-emerging as a key contributor to retirement incomes, there is a renewed focus on tools advisers can utilise to help maximise returns, particularly in a low-yield environment.

A recent research paper by portfolio construction specialist Parametric, showed that intelligent after-tax performance on an average MySuper actively managed balanced portfolio could create a 37-50 bps per annum increase in performance which over time could result in a significant increase in portfolio value and a better outcome in retirement.2

Additionally, minimising transaction costs can also add value to portfolios over time. This can also be achieved by utilising platform functionality which allows the in specie transfer of assets both in and out of managed portfolios, as well as netting which minimises unnecessary buys and sells across client accounts on the platform.

Often a one-size-fits-all approach to investments isn’t ideal as some clients have specific needs in terms of the types of investments they may want to avoid.  Having the ability to set exclusions or substitutions with regards to certain stocks or sectors can add value to a client by providing them with the flexibility to adjust portfolios to suit their needs.  For example, a client may wish to exclude stocks for companies they consider unethical.

These tangible features can make a considerable difference to client outcomes over time but it is important to note, not all platform functionality or managed portfolio solutions are the same and there are a number of different structures and capabilities available in the market. Further, both adviser and client benefits can be diluted with less sophisticated solutions. 

Unlocking value through investment management technology and business efficiency

The ability to access flexible technology and solutions that allow investment managers to effectively implement their strategies can also enable better outcomes for clients. 

Progressive Portfolio Implementation (PPI) functionality is available to investment managers who use HUB24 and provides the opportunity to modify portfolios so that the manager can best serve the interests of new and existing clients, which can differ. 

For example, an investment manager may believe a stock is reaching full value so it may not be the best option for new clients, however they may not want to sell down for all their existing clients.  Having the flexibility means investment managers can better manage CGT impacts for clients already in the portfolio.

For new clients, this flexibility can prevent investment managers from purchasing assets likely to be sold in the foreseeable future, limiting transaction costs and making available to their clients an alternative investment with potentially more upside potential. 

Additionally, minimising currency conversions within international portfolios by providing the ability for investment managers to hold foreign currency, can again potentially reduce costs and enhance performance for clients over time.

Technology has been the driver for the new wave of managed portfolio solutions and their increased demand is a result of advisers looking for efficient methods to deliver their value proposition and provide the best solutions to deliver to their customer needs. Managed portfolios have offered advisers the ability to re-engineer their practices giving them more time with their clients and emphasising the value in strategic advice. 

A white paper conducted on behalf of HUB24 by Forte Asset Solutions demonstrates the measured benefit to a practice that integrated a platform and managed portfolios. Over the three-year transformational period, the business grew its funds under management by 30 per cent and gross revenue by 85 per cent. The journey began with the appointment of a managed portfolio provider and the outsourcing of asset management and led to increased corporate governance, enhanced client retention and attraction, and reduced market risk to revenue. 

Importantly clients also experienced many benefits from the implementation of managed accounts as an investment option including better communication, improved service levels, and time savings as well as an improvement in client satisfaction and engagement.

This level of transformation is now required if advice practices are to successfully redefine themselves in the current operating environment. For advisers and their clients, unlocking latent value through business efficiencies and innovative product solutions is creating new and exciting opportunities for the advice industry.

But technology and innovation do not stand still, nor do they operate in isolation and platforms will not look the same in the future – in fact, we believe the future of platforms is in bringing disparate sources of client data together to seamlessly integrate their wealth experience.

From early next year, advisers and their clients can use HUBconnect, a data integration service tool that brings multiple data sources and applications together to provide advisers with a single view of their client’s wealth position, and produce reports and insights based on how they see their client accounts.

It is these services, in conjunction with ensuring clients have access to the best solutions to enhance the value of their portfolios overtime, that will become a focus as the advice industry moves towards utilising technology to unlock further value for clients.


1The Advisers Best Interests Duty: Creating Better Advice - January 2019

2Drip Drip:  The case for controlling what you can control – Parametric Portfolio Associates November 2019

Disclaimer

The information in this release is intended to be general information only and not financial product advice. It does not take into account any person’s objectives, financial situation or needs. It is not legal advice. Before acting on any of this information, the reader should consider the appropriateness of the information having regard to their or their clients’ objectives, financial situation and needs. Past performance is not indicative of future performance and any forward-looking statements in this release are not representations or guarantees as to future performance.

Using technology to unlock value for advisers and clients
HUB24
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