Combined, there are almost 150 master funds and wraps operating within Australia’s investment landscape, but over the past few years the same handful of players have dominated the pack.
There are a number of quantitative and qualitative means of ranking this competitive group, and the methodology used determines which product provider can claim to be top of the industry in its field.
This article ranks the top players in the master funds/wraps space using three different perspectives — first, by taking a quantitative viewpoint and determining which master fund/wrap is the largest in terms of total funds under administration (FUA), then using the same process to determine which is the largest in terms of cash flow (this incorporates net flows and transfers) and, finally, determining which provides the best service by using both qualitative and quantitative measures.
Keeping with the theme of Money Management’s Top 100 Trends Report, this article also provides a historical viewpoint in its analysis of the Top 50 platforms.
The 2007 Top 50 platforms based on total FUA
When considering its prominent ranking in the previous two years of Dexx&r’s research, it comes as no surprise that MLC’s master fund, MasterKey, is this year’s top platform in terms of largest FUA.
Last year alone, more than 8,000 advisers used the platform in the 12 months to September 30, making it the third largest platform by adviser numbers in the Wealth Insights/Assirt Service Level Survey 2006 report.
The industry heavyweight has maintained its popularity by, among other things, keeping abreast of technological changes such as the recent introduction of online applications.
However, does ranking well in the popularity stakes go hand-in-hand with having the largest FUA?
In answering this question MLC general manager of platforms Anthony Waldron admitted legacy also played a role.
“We actually transferred a lot of our clients over the years, so, as our offers improved, we haven’t just left them sitting in old products, we moved them as much as possible into being able to garner all the extra benefits of being in MasterKey,” he said.
Waldron added that being the first provider to offer the now popular ‘mini-platform’ back in 2000 also contributed to MLC securing the top ranking.
“Our whole platform story is integrated historically with our investment management approach … so there was strength not only in the platform, but a lot of the strength in our multi-manager investment approach as well and, therefore, that has garnered a lot of support early on and support we have continued to receive,” he said.
“We haven’t just relied on our aligned financial planning arms and the bank channel; we have also had fairly good representation support from IFAs (independent financial advisers) as well.”
Following behind MLC MasterKey over the past three years have been the same group of seven competitors ranked in the same order (see table on p47).
Coming in at second place this year in terms of total FUA is AMP’s Flexible Lifetime, with Colonial First State’s (CFS) FirstChoice ranking third in this category.
However, CFS’ ranking is substantially different when considered from the perspective of cash flow (see table on p48).
Top 50 platforms based on cash flow
Despite nipping at the heels of MLC in terms of platform FUA, CFS is head and shoulders above its competition in terms of the cash flow of its flagship platform FirstChoice.
According to the Dexx&r research, FirstChoice (wholesale) boasts the highest cash flow in the industry, with the retail offering of the platform coming in shortly behind at third.
Dexx&r said it separated the two offerings in its research because each was targeted at different markets.
“While both may be administered on the one system, the two versions of FirstChoice provide advisers with different remuneration and fee structure options,” the researcher said.
However, CFS product and investment services general manager Alan Kenny said the two offerings were usually considered as a single platform.
Viewing FirstChoice in this way means the platform’s cash flow figure is in excess of $7 billion.
“Since we launched FirstChoice nearly four or five years ago we have been leading the market,” Kenny said.
Attributing this success to the three pillars of “great value, excellent service and relevant choice”, Kenny said CFS had made some “pretty radical” changes to the platform in response to adviser demand, including a comprehensive update to the FirstChoice menu, launching a new range of internally-geared managed funds and offering the first fully-integrated platform margin lending service.
“We have really tried to focus on broadening the type of investments we provide to financial advisers,” Kenny said.
“In particular, we’ve expanded out a new multi-manager global specialist range of products covering three new asset classes for us: Asian shares, global listed property and global listed infrastructure.”
These measures have certainly paid off for FirstChoice, which last year was the largest platform in Australia based on adviser numbers, as revealed in the 2006 Wealth Insights/Assirt Service Level Survey report.
The survey’s results were based on the responses of 855 randomly selected advisers and found that FirstChoice scooped nearly 50 per cent of the financial planning community.
“We launched in 2002, and in the five years that have gone by we have actually grown to now over $35 billion in size, which is a fantastic achievement given that we’re now, in terms of FUA, in the top three, alongside players who have been in the marketplace longer than us,” Kenny said.
A qualitative perspective
As stated previously, there are numerous ways of ranking the industry’s top master funds and wraps.
Interesting differences are revealed when comparing Dexx&r’s quantitative means to the research employed by Wealth Insights managing director Vanessa McMahon through qualitative methods such as adviser focus groups and in-depth interviews.
According to McMahon, these research methods highlight that to be successful in the platform market a number of elements must be in place.
“To even get off the starting blocks, the managed funds menu must offer a good selection of high quality, sought after funds across all the key asset classes,” she said.
“Then the level of service and support must be good.
“Finally, it must provide value for money for the investor while still allowing a reasonable commission or fee for the adviser.
“Those platforms that are not meeting advisers’ expectations regarding any one of these key elements will lose adviser support.”
Quantitative means are also used by Wealth Insights in its platform analysis.
The latest of these studies, the 2007 Wealth Insights/Assirt Annual Service Level Survey, saw Macquarie Wrap secure prime positioning in the platform category for providing the best service in the eyes of financial advisers.
The independent survey asked 900 advisers to rank 16 of the most popular platforms.
Following behind Macquarie Wrap in second place was AsgardElements, with Asgard eWrap and FirstChoice in equal third.
As is the case with the table on page 47, the same players have dominated the top three rankings of this survey for a number of years.
