Platforms taking too big a slice of the pie

Platforms are taking a bigger slice of the investment value chain than they deserve, according to the head of asset management at Equity Trustees, Shaun Manuell.

Speaking to Money Management, Manuell suggested that the portion of the value chain that platforms have captured in the financial services space is greater than what they add to the industry.

“If you look at the state of the value chain in financial services, what we think is peculiar in the Australian market is the way in which platforms, which are effectively administrative tools, have taken such a large proportion of the value chain, and it’s incongruous with the value that they’re actually adding,” he said.

“In terms of financial services, the end clients are mum and dad investors, [so] our understanding is that the value an investor is paying for would be the personal relationship they have with their adviser and technical support, be it asset management or super. We don't see why clients want a large part of the value they are paying going into the administrative or custodial part of the value chain,” Manuell said.

Many of the banks that have purchased investment platforms now have to justify the prices they paid for those platforms, he said.

The providers of administration and custodial services in Australia have also captured a larger part of the value chain than equivalent providers overseas, Manuell said.

“It’s a historic anomaly ... If you were going to start again, you would ask yourself if you think that financial services is a ratio of 1 to 1.5 per cent, who is driving it? Who is taking the greatest value of that? You would say your adviser, not the person who is generating asset statements for me,” he said.

While Equity Trustees' asset managers weren’t looking at any hard facts in terms of platform costs and value, they would not be surprised if over the next decade platforms aligned themselves more with how the value chain looks like overseas, Manuell said.