Back to basics is a sign of the times

It isfunny how often things come full circle in the financial services industry. The latest example is what can be increasingly seen as a trend amongst Australia’s major investment platform providers to go back-to-basics in the construction of their master trust products.

It seemed like only yesterday that we were being told that the future of the investment platform market was in all encompassing master trust and wrap type products, which offered unlimited investment choices and comprehensive consolidated reporting — a future far removed from the simpler master trusts which were the market’s heritage.

But all of a sudden the message coming from many of the major master trust providers has changed.

Last week, ING launched a new flagship master trust, OneAnswer.

Like Colonial First State before it, which released its FirstChoice platform in May, ING launched OneAnswer as an anathema to the increasingly complex and expensive master trust and wrap products that had become the norm over the last couple of years.

And the back-to-basics message appears to be getting through. FirstChoice, for example, has taken an impressive $850 million since its launch just three months ago, and has now set itself a target to grow by $200 million per month. Advisers also speak highly of the product’s relatively simple fee structure.

So what is the cause of this movement back to simplicity in the investment platform market?

Providers say it is a direct result of feedback from both investors and their advisers. When launching OneAnswer, ING’s executive director Ross Bowden said the group’s decision to take a back-to-basics approach was very much influenced by research carried out on the needs of financial advisers when it comes to investment platforms.

However, it is also likely that the back-to-basics push in the platform market has something to do with the current investment climate. With investment returns down, investors are looking more at the fees they pay and there is no doubt that simpler master trusts will more than likely mean cheaper master trusts.

It will be interesting to see, when the trends in investments markets finally turn positive, whether the trend in the platform market will once again be for more complex, and more expensive, master trusts and wraps.