The shift in advisers’ business model strategies to better target client groups will affect the traditional methods of distribution and force asset managers to better respond to a growing direct market.
However, the direct market and the advice market do not necessarily have to compete from asset managers’ point of view as there were more external factors impacting a traditional advice channel, according to Challenger’s chief operating officer, David Mackaway.
“At times, I’ve been involved in the discussions where people were saying [the market] was moving to direct versus advice, and there are in competition with each other. But I do think of it slightly differently,” he said, speaking at the Calastone Connect Forum.
“We do see that advisers are becoming very targeted about who they want to be delivering their advice to, and how they can have an ongoing business model. For us, it’s not a choice that we are deliberately making or we are pivoting the business to more of a direct focus.
“There is a lot of advice businesses that are pivoting away from clients that they used to have and really making those clients go in the direct way.”
Mackaway also stressed that Challenger’s focus remained definitely on a business-to-business model as clients typically had their initial interactions through the advice process before they would go to purchase any products, but he stressed that recently there was a growing number of customers coming directly.
“We are still a very strong believer in the advice and advice-led models but it is changing and we are seeing advisers adjusting their business model and the clients that they are targeting,” he said.
“Which means that there was always a direct market there, but the size of that market is now getting bigger.
“[We] are definitely seeing more and more customers coming to us directly, we do need to up the ante on our individual capability.”
On technology, Mackaway reassured advisers remained central and all the process, which had not been yet digitalised, would also need to support advice businesses.
“This where we are seeing an opportunity – in building the capability that supports direct business, but where we can also make advisers jobs easier.”