Platforms positioning for change

The rapid growth and evolution of platforms over the past decade means that they are better positioned than most to deal with whatever regulatory and commercial environment evolves as a result of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

With recent research results from Investment Trends confirming the continued rapid evolution and the increasing level of self-licensing by financial advisers, the platform providers see themselves positioned to grow and thrive.

However, at the same time as the platforms look to the future they continue to jostle and compete on technological development and price, with Westpac/BT’s announcement that it was lowering the fee structure attaching to its Panorama Investment Platform being the major announcement.

In circumstances where the smaller but nimble netwealth and HUB24 have tended to gain adviser attention via technological usability and their delivery of managed accounts, price is not the key determinant it once was with industry analysts such as Bell Potter’s Lafitani Sotirou and James

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Filius pointing to the fact that you need to look deeper than the fee alone towards functionality and service delivery.

They suggested that comparing investment platform fees was incredibly complex, with a range of variables to be taken into account and that while some, such as Panorama, had low asset base fees, these could be offset with other fees such as cost recoveries and a high cash account fee.

The views of the Bell Potter analysts seemed to be validated by netwealth’s Matt Heine during Money Management’s recent Managed Accounts webinar where he pointed to the ongoing nature of price competition.

In later discussion with Money Management, Heine said platform pricing had received a lot of airtime but netwealth believed competition was positive for the industry, and that with wholesale and retail rates converging, advisers would be in a better position to select products based on client best interest, how good the technology was and who provided the best service.

For its part, BT noted when answering questions posed by Money Management that its pricing announcement had represented a step away from differential pricing between licensees.

It positioned the change as “moving away from [differential pricing] and “offering new low, transparent pricing on BT Panorama to all advisers and their clients”.

While, like the rest of the industry, the major platform executives have an eye on the Royal Commission outcomes, most believe they are compliant enough and sufficiently adaptable to position for the planning industry’s next evolution.

HUB24 chief executive, Andrew Alcock sees self-licensing as an opportunity rather than a challenge as his business positions to deliver advisers the services they need to live in a non-dealer group environment.

“Advisers are voting with their feet and getting their own license or moving to more flexible licensees where they can choose a best-of-breed product that is better suited for their clients’ needs,” he said.

Alcock said that advisers getting their own license would need increasing levels of support and the ability to seamlessly integrate their client data across the business and access to technology that would support them in efficiently managing their clients.  

“Platforms are ideally positioned to help advisers who want to BYO data, integrate and seamlessly connect their preferred technology solutions – CRM, accounting software, modelling tools and more,” he said.

“Platforms have traditionally been built for asset administration, though increasingly we are seeing technology evolve and it is now helping investment managers implement their intellectual property on platform – influencing tax benefits and investment outcomes that will help support advisers in satisfying client best interests.”

Specifically asked whether he could see a day when platforms represented the delivery mechanism for financial planning software, Alcock acknowledged that some aspects of financial planning software within platforms could make it easier for advisers and their clients, such as generating Records of Advice (RoAs).

“... but we see it more as providing advisers with the choice to seamlessly integrate different technology solutions to create the right outcome for their business,” he said. “Naturally there is a role for platforms to play to enhance the functionality available, but not necessarily to replace it.”

Netwealth’s Matt Heine agreed with Alcock on the likelihood of increased levels of self-licensing serving to benefit platform providers.

“With an increased number of non-aligned advisers operating in the market the opportunity for specialist platforms continues to grow exponentially as advisers, who previously had limited choice, look to migrate off incumbent technology and utilise new services with broader, more sophisticated, offerings,” he said.

BT Financial Group’s Head of Platforms Product Management, Dina Kotsopoulos also noted the increasing number of advisers exploring their licensing options and said BT was committed to developing and maintaining strong relationships with all advisers including those associated with dealer groups and those who were self-licensed.

“It’s for this reason we’ve introduced a new low and transparent pricing structure that does not differentiate pricing for BT Panorama based on scale,” she said. “We’ll also shortly launch BT Open Services, a new online adviser services hub to support practice managers, licensees, advisers and support staff regardless of their licensing arrangements.”

“We expect to see further movement to self-licensed and smaller dealer groups and our platform offer is designed to provide solutions and pricing that is accessible to dealer groups and adviser businesses of all sizes,” Kotsopoulos said.

“In the year to June 2018, we’ve seen strong traction among IFAs including a 197 per cent increase in new accounts under IFAs and 92 per cent increase in FUA from IFA practices. We expect that our recent decision to introduce low transparent pricing will further appeal to this market.” 

Not unlike Alcock, netwealth’s Heine said that while he saw platforms picking up ground with respect to planning software, he did not envisage a takeover occurring.

“Whilst there is a lot of crossover between what platforms and planning software do today, such as generating ROAs, reports and fee disclosure statements, they are still very different offerings,” he said.

Further, Heine said there had been a number of examples in the past where “hybrid” platforms had not been able to deliver both services successfully and maintain the ongoing functionality required. 

“Increasingly we see platforms providing better integration options where data is being both sent and received to multiple parties reducing data entry, increasing efficiency and providing more seamless experiences,” he said.

However, while Alcock saw no particular implications flowing from the Royal Commission into Banking, Superannuation and Financial Services, Heine sees the likelihood of meaningful change, particularly as it prompts the banks to continue their divestment of wealth management interests.

But the degree to which platform providers benefit from the changes will depend on their approach and positioning.

“With the continued divestment of wealth management by the banks, the opening up of APLs, and advisers seeking greater choice, many institutions will need to reassess their platform and revenue strategies to ‘future proof’ their offer and consider how they interact and/or partner with other platform providers,” Heine said. “The commercial benefits will still exist but the way in which these are generated and managed to avoid conflicts will see new business models emerge.”

BT’s Kotsopoulos signalled that BT would be focusing on platform capability rather than specifically aiming to be a delivery mechanism for financial planning software.

“Platforms provide more than just reporting or trade execution; they offer a range of features including administration efficiency, portfolio construction tools, compliance frameworks, and support a variety of tax strategies,” she said. “Our focus remains on providing an offer to clients and advisers that continues to meet their evolving needs.”