WITH THE Future of Financial Advice (FOFA) reforms bedded down, there has never been a better – or more necessary – time for advisers to re-evaluate their value propositions, systems and back-end processes in order to better position themselves to become efficient, effective and profitable in the new regulatory era.
New compliance burdens on top of the day-to-day business of running an advice practice have meant advisers are looking for any help they can get – and some of the most popular sources of help are the wraps, platforms and other products designed by banks and boutiques alike.
In late August, Sterling Publishing – publisher of ifa – assembled the country’s leading product executives, developers and business development managers for the 13th annual Wraps, Platforms & Masterfunds conference. The event was a chance to gain insights into the thinking of product providers as well as ask them some tough questions, forcing them to challenge their own value proposition – just as advisers do on a daily basis.
Here are some of the highlights:
Panel One:
THE BIG END OF TOWN
In one of the most eagerly anticipated panels of the conference – if not the year – representatives of some of the largest platform providers assembled to discuss competition, consolidation and what life’s like at the top.
Recep peker –
Is market consolidation a good thing for financial planners?
Kelly Power –
The good side of consolidation is efficiency for the industry and cost efficiency for clients. The other side of that is that if you are too focused on consolidation – and too inward-looking – then you can fall behind as the rest of the market moves on and becomes quite innovative. So you have to keep abreast of developments and continue engaging with customers.
Adrienne Cochrane –
This is something very much top of mind for our business. You can spend a lot of time on integration and migration and capitalising on scale – but at the same time, you need to watch what’s happening in the market.
Justin Delaney –
I don’t think it’s a good thing or a bad thing – I think it’s a reality. Scale is important, but it’s as much about distribution as it is about platforms. If you end up with all the distribution owned by the platform then I think that could be a bad thing over time for the end consumer. But I think at the moment there is enough competition and enough opportunity.
Kelly Power –
I don’t think vertical integration impacts competition. As long as you’re acting in accordance with the best interests duty and as long as you’re not complacent, there will still be healthy competition.
Scott Durbin –
Individuals have choices. If you are trying to distribute a sub-standard product through a distribution network, the network will respond and they will simply walk.
Recep peker –
Should advisers consider multiple platforms in order to comply with the FOFA best interests duty requirement?
Justin Delaney –
It depends on the platform. If you have guided architecture then this might create problems but if you have open architecture and no restrictions, then I think that’s fine. We see platforms as an enabler to transact on behalf of their client and act in their best interests.
Kelly Power-
This goes back to the whole ‘Are we a service or are we a product?’ debate. If you’re just offering your manufactured product to your planners through your platform and with your insurance, then I think this will have big alarm bells for ASIC in terms of conflicts. But if you are offering open architecture and offering choice, then I think that’s fair.
Recep peker –
Should there be a flat dollar price for platforms?
Kelly Power –
No, particularly with super where there’s a risk premium as you go up the curve. The problem is that to get to a net neutral position you price out the small clients – which means the people that most need advice can’t access platforms and can’t access advice.
Scott Durbin –
We are increasingly seeing that anyway, as fee capping is bringing a flat price into the market. I agree it just doesn’t work and gives you real problems.
Justin Delaney –
If the market was starting from scratch again you could probably make it work, but with incumbency and legacy it’s probably too late.
Adrienne Cochrane –
I agree – it’s all about those small balances. There is different menu pricing for various options, which is much better than a flat fee.
Recep peker –
What will the next stage of innovation in the platform space look like?
Kelly Power –
The integration of wealth and banking for us is very important and also responding to technological change, making sure users have accessibility to services.
Adrienne Cochrane –
Yes, integration with other offerings, whether it be banking, SMSFs etc. and also integration with advisers and the changes in their advice models.
Recep peker –
How will FOFA’s ‘grandfathering’ provisions affect flows to platforms?
Kelly Power –
It is a risk, and probably an unfortunate risk for some of our clients. In terms of transfers from other products, it’s not a huge proportion so grandfathering probably won’t hinder our flows too much.
Justin delaney –
Overall, there’s no doubt flows will be harder to come by. The opportunity is just to be as open as possible.
Panel two:
The view FROM AFAR
In this panel, BT Financial Group’s Kelly Power led a conversation with technological innovators from industries outside financial services, finding many parallels and tips for platform providers.
Kelly Power –
Tim, MYOB has somewhere in the order of 50 to 70 per cent of the market – something we can all aspire to. How do you maintain scale and deal with new entrants?
Tim Reed –
I heard you in the last panel say ‘the instant that you’re not focused on your customers, you do become marginalised’ and that’s absolutely the case in our market. For about two decades, we had what some might call a duopoly where we probably had two thirds of the market and one competitor who had the most of the rest. We’ve seen in the last two years quite dramatic changes and we are immensely glad that we started to make the transition to the cloud when we did if we look at our own flow. Fifty per cent – or it’s a little shy of that – but north of 40 per cent of new businesses coming to us today are signing up directly for a cloud-based product, and if we hadn’t put those cloud-based products out in the market when we did, half of our market share probably would have gone as well. So I don’t think it’s our brand that has kept us there; I think it is the investment in new technology and the innovation that we’ve brought to market that has allowed us to maintain it.
Kelly Power –
Tino, how do you differentiate and deal with new entrants and competitive pressure in your space?
Tino Ho –
OzForex has had a web-based platform for more than 10 years and I think we’re lucky enough to not have to deal with sort of shifting from one technology to another – and that’s to the cloud – because we’ve always had a web-based platform… We’re almost partnering with our competitors and I think that’s starting to eat away at the banks’ market share although they still have quite a large portion of the market share in terms of foreign exchange. I suppose our capability to do that has allowed us to reach customers that we wouldn’t otherwise be able to reach on our own as effectively as other third parties. For us, it’s about partnering with third parties rather than competing against them, and using our smart technology to sort of reach or deliver an efficient solution – and quickly as well – on the one platform.
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