It has often been said that stock brokers and securities traders look down on the fi-nancial planning industry. That’s going to be less likely in future, according to Warren Parish, a strategic planning consultant with major financial software devel-oper GBST.
It has often been said that stock brokers and securities traders look down on the fi-nancial planning industry. That’s going to be less likely in future, according to Warren Parish, a strategic planning consultant with major financial software devel-oper GBST.
Parish says it is the financial planning industry that is driving the major changes in the securities industry both in Australia and the United States.
“The ability of brokers to make money increasingly depends on a fee-based ap-proach,” he says. “And most of the fee-based software has been developed for the financial planning industry.”
The move to fee-based transactions in the US, he says, has been massive and the pattern is likely to be repeated here in Australia.
Yearly revenue from fee-based activities is predicted to rise from the current US$9.2 billion to about US$27 billion by 2003, a growth which will put extreme pressure on commission sellers.
“It paints a dismal picture for traditional brokers,” Parish says. Brokers, that is, who refuse to adopt some of the techniques already mapped out by the financial planning industry.
However many brokers, according to Parish, have realised the need to change and some are even employing financial planners.
“At the same time the infrastructure has to adapt to meet the demands that the pub-lic place on financial intermediaries.”
And while Australia inevitably follows the technological trends established over-seas, Parish says that in many ways Australia is leading the US in the development of this new software architecture and is producing products better than anywhere in the world.
“The US might have developed the original ideas but Australia is making better and faster versions,” he says. “Soon Australia will even be exporting some of this software back to America.”
The key to this extraordinary development has been the robust nature of Australia’s financial planning industry. Parish estimates that there are up to 14,000 advisers in Australia compared with 22,000 in the US. In planners per population that puts Australia way ahead.
“Australia has a more mature financial planning industry. It started out right and it got in on the developments early,” Parish says.
The challenges to the Australian industry will continue, however, an example be-ing the imminent arrival of US firm Charles Schwab.
“Schwab will change the fund industry here. In the US, it markets something like 2500 funds direct on-line. Some people trade funds like stocks. In fact, there are more funds than stocks on the US share market,” Parish says.
Despite this, he says the need for face to face financial advice will still exist.
“I worked in one of the first large financial planning firms in the US, with over 800 planners in 254 locations. People asked the question then ‘Can you institutionalise personal service?’,” Parish says. The answer is, of course, you can’t.
So while planners will still have to talk to real people, they will also be faced with a multitude of technological tools to choose from to assist them. The path from the desktop to the back office could take many possible routes.
GBST is working on a common protocol for all transactional platforms which could simplify the process of buying and selling.
“The key,” says Parish, “is connectivity.” He also predicts that up to 70 per cent of all financial product trading will be web-based within a few years.
“In the future financial planners will view the web as an ally not an enemy.”
