Challenging the traditional platform role

As I begin my leadership of AMP’s platform business, it’s clear to me the only way we can shape the future of our industry is by designing solutions through the lens of advisers.

That is, how can we, as platform providers help advice practices set up for long-term sustainable growth amid an industry that has faced significant disruption and increased costs. More specifically, how can we support them in providing high quality, professional advice, while at the same time reducing their cost to serve?

There are four fundamental ways we, as an industry, can achieve this:

1. SUPPORTING PRACTICE EFFICIENCY

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The first objective of any platform provider should be to help advisers run their businesses smarter and more efficiently.

This starts with great reporting and easy to use advice implementation tools. But if we take a longer-term view of where our industry should aspire to be, we should challenge ourselves to move beyond the traditional role of the wrap platform. 

In running their practices, most advisers operate multiple technology platforms – the wrap will support advice and investment strategy execution, but they rely on separate platforms to support the modelling and statement of advice process, and require a client relationship management (CRM) system and accounting software.  

How wrap platforms can better integrate with, or even provide these other services through the platform, should be key considerations for providers. The ability for example, for a wrap to generate a fully-compliant statement of advice using the latest available technology, would likely create significant business efficiencies, both in terms of cost and time, and ultimately deliver a more seamless experience for clients.

Our industry has work to do to get to this potential future state, but if we can work closely with advisers in developing and integrating the core advice processes and systems that make it easier to run their practices and deliver, high-quality, compliant and professional advice we’ll be moving in the right direction.  

2. UNDERSTANDING WHAT ADVISERS MOST VALUE IN A PLATFORM

In developing the value proposition for advisers, we must also take the time to understand what they most value in a wrap platform. 

At the top of the list is low fees, the need for which has been reinforced by the increasing cost of providing advice. But we also require greater fee transparency across the industry.  

As AMP Australia’s new chief executive, Scott Hartley, recently said, all financial advisers should have access to the same platform pricing from their chosen provider and not have to compete with selected advisers getting preferential deals.

The use of rate cards, for example, is distorting pricing and equity in super and pension wrap products, as not all financial advisers using the same platform can access the same prices for their clients. 

Low and transparent fees shouldn’t come at the expense of investment in the features which enhance the investment strategy execution process – the core function of any wrap platform. 

For example, we know advisers value investment switch functionality because it enables the modelling of various investment portfolio changes, and the ability to understand impacts to fees and a client’s risk profile before submitting trades, all through a single process. 

It’s the most used feature on our North platform, with more than 100,000 switches conducted annually, and something we’ll continue to invest in and refine. 

Other core features popular with advisers using platforms include flexible pension payments, streamlined account transfers from super to pension and straight through processing.

It’s high use, everyday functionality like this that makes a real difference to the effectiveness of implementing advice strategy. It also saves advisers time, giving them more capacity to spend with existing, and new clients. 

3. SUPPORTING CLIENTS FOR LIFE

The investment needs of Australians evolve through the different phases of their lives, and platforms must provide choice and investment solutions accordingly. 

A growing portion of advised clients in Australia, for example, are nearing and entering retirement. We should therefore offer simple solutions through our platforms that help clients manage the often-complex transition to retirement. 

Improvements are made by considering questions such as: How do we make it easy for advisers to help their clients understand critical concepts such as longevity and sequencing risk, and provide solutions through the platform to mitigate them? How do ensure we cater to the growing demand for socially responsible investment options?

How do we provide transparent, efficient and low-cost access to the industry’s leading investment managers?

This has led us to continue to invest in retirement-focused solutions are designed to manage sequencing risk in retirement.

Managed portfolios have seen an acceleration in use across the advice industry – 44% of advisers in Australia now use them for their clients according to research published by Investment Trends in February this year. 

They’ll continue to grow in popularity because they embody the attributes which advisers most value in running their practices, i.e. high-quality, low-cost and responsive investment solutions which are delivered simply, efficiently and transparently. These characteristics are directly applicable with how our industry should be thinking about the overall platform proposition. 

4. EDUCATE AND INFORM

Finally, if our industry aspires to become more integrated with advice delivery, platform providers need to consider how they can help advisers stay on top of what matters most to their clients through insights, education and expertise. 

Providing the right investment solutions is one thing, but helping advisers understand the value of these solutions within the context of a continually changing market environment is another. 

The value advisers get from education resources is reflected in the number of requests received by our technical insights team every year to understand Australia’s complex and changing retirement and superannuation system. So far this year, the team has received almost 7,000 calls from advisers with questions covering a range of topics.

The questions are wide and varied, covering everything from concessional, non-concessional super contributions and death benefits, to topics such as means testing requirements for social security, transfer balance caps for retirement income streams, self-managed super fund investment rules, capital gains tax rules on the sale of investment assets, and the financial treatment of a former home as it relates to aged care.

The team also continues to spend significant time helping advisers understand the many regulatory changes impacting super, including the latest changes to take effect from 30 June this year. 

Helping advisers understand how these changes impact their clients, and the implications for their investment and retirement strategies, is essential to quality advice. And, if the goal is for platforms to become more embedded in the advice process, it makes sense to offer these resources as part of a more complete service and solution.

It all comes down to what platform providers see as their role, and deeply understanding the advice process and how advisers run their businesses – because it’s about being a partner, not just a provider. 

Platforms, and their supporting services, should have ambitions to better integrate with advice practices – working side by side with advisers to support practice efficiency and deliver high quality advice to clients. This will not only improve outcomes for advisers, but also help to better develop the platform itself, with innovations that put the advisers and their clients at the centre. 

Edwina Maloney is director of platforms at AMP.