Forget wrap accounts, screen scrapers and Internet broking, the next big battle in the financial service industry will take place on the financial planner’s desktop.
Research houses, software providers, fund managers and master trust/ wrap/ IDPS operators are all lining up for the chance to win They are all putting together systems designed to offer advisers a single platform for all their financial planning needs. This platform will be available at the click of a button, through the Internet and in real time.
Whatever you call these services – Application Service Providers (ASPs), next generation wraps or horizontal portals – they are all designed to do the same thing, that is, to be the middleman between the financial planner and all their service providers like fund managers, master trusts, stock brokers, software providers and research houses. They are the combination of a wrap account, online transacting, cashflow management, research and planning software. They might even throw in a bit of screen scraping for extra consolidation.
In the past fortnight alone, we have witnessed the rollout of AM Corp’s Bureau service and the ramping up of IFP Solutions’ ASP. More is set to come from the likes of Wealthpoint (Assirt’s parent company), MLC and AMP. Both AMP and MLC have developed strong platforms for direct investors (Your Prosperity and AMP Direct) and both have developed platforms for their own advisers (which number more than (3500 in total). It is surely only a matter of time before they put the package together and offer the one stop shop solution to the entire industry.
Is this just another attempt by the industry to add yet another layer of intermediary between investment managers and investors? It is certainly an effort to garner loyalty from advisers and corner a percentage of funds under advice, much like wrap accounts.
But will this extra percentage mean higher fees for investors and lower pay for advisers? Probably not. It is important to remember that these platforms are Internet based and as such will be expected to offer some sort of saving. Just look at the way fees for online broking tumbled as the battle for market share intensified.
And delivery will be via financial planners so there is little likelihood that the operators of these platforms would even consider reducing commissions.
The groups who are likely to take a hit from these services are master trust providers who fail to mover with the new market and fund managers who will continue to see more trimmed from their cut of management fees.
The paradox of the continued crisis of confidence in all things Internet and this major step in the delivery of financial services is not lost on the players involved. While the crash in Internet stocks over the past year may have dried up capital for new players to develop quality online platforms, the established financial services players have put their substantial financial muscle behind their own Internet plans. It seems we are at the starting gates of phase II of online financial services.
