Platforms have a “once in a generation” opportunity currently as the rise of self-licensed financial advisers prompts advisers to select their platform of choice.
The first growth opportunity comes from self-licensed advisers selecting their platform, and secondly from a move by larger licensees to be “product agnostic” and allow advisers to choose their own favoured platform from their approved product lists (APLs).
In its Australian Financial Advice Landscape report, Adviser Ratings found HUB24 and Netwealth are in first and second place, rankings unchanged for the past four years, followed by CFS FirstChoice and Mason Stevens. In fifth place is new entrant CFS Edge, which was launched last year.
On average, 79 per cent of funds under advice (FUA) are invested through platforms, up from 77 per cent in 2022.
“Platforms are currently experiencing a crucial growth phase with key decision-making underway by practices and licensees on their technology stacks, including platforms. These pivotal moments in an individual adviser’s decision-making typically occur every six to seven years.
“The convergence of self-licensing, artificial intelligence, other enabling technologies, adviser profitability and regulatory changes such as the Quality of Advice Review has created a decision environment more intense than any seen since the Hayne royal commission.
“This last industry-wide decision point particularly benefited Netwealth and HUB24 due to banks exiting the advice sector.”
Selecting a platform
When it comes to selecting the right platform for their firm, there are numerous considerations that advisers must factor into their choice. These include features of the specific platform itself, how it will fit in with their desired clients and whether it will be suitable for the type of practice they envisage running.
Some may opt to use multiple platforms, such as one for their target segment and a second secondary platform for clients with simpler needs. Others may consider the administration and servicing of a platform, and whether it has digital options and online tracking or contact centres while fees are another consideration.
Recep Peker, managing director of research platform SuitabilityHub, said: “For those becoming self-licensed and establishing a new practice, it can be advantageous to select a target market (e.g. target segment of clients) to focus on rather than trying to become all things to all people right off the bat. This gives them the opportunity to develop their processes and refine their business model so that they can scale their business with confidence.
“As such, before selecting platforms, new firms should first consider their team structure, types of clients they intend to serve, what advice strategies and products they will be recommending, how they will differentiate their service proposition, and how they will ‘delight’ their customers. This will equip them with the right questions to ask when choosing their platforms.”
Peker said that even if platforms had a rich number of features, it is not the case that every platform will have every feature. For example, he said, HUB24 and Netwealth only overlap on around 60 per cent of their features which means advisers need to be very specific with what they are seeking.
“This is a very positive aspect of our platform industry, every platform has its own way of distinguishing itself! But it also means it’s very important for advisers to pinpoint the specific needs of their business and their clients in deciding on which platform will be the most suitable to them.”
From the Adviser Ratings report, it stated advisers place the greatest emphasis on adviser experience (100 per cent), overall pricing (92 per cent), business development manager (64 per cent), and client experience (61 per cent).
“Clients play a significant role in an adviser’s decisions. Clear dashboards, platform interfaces, and accurate reporting enhance clients’ perceptions of their advisers. Additionally, advisers are increasingly aware of the differences between full-service platforms and more bespoke platforms, with functionality being more critical for existing clients who were dissatisfied with promised features or frustrated by full-service platforms lagging behind peers.
“While a poor individual client onboarding experience can be frustrating, the ongoing support and experience for advisers and their clients outweigh any decision to switch platforms.”
Money Management previously explored how business development managers (BDMs) are playing a greater role in the relationship with financial advisers.
“The role of BDMs in supporting advisers is significant. Their product, industry and competitor knowledge, along with ‘on call’ technical assistance, are essential for advisers considering to stay or switch platforms.”
How are platforms developing in response?
As for how we could see the platform industry evolve further in the future, Adviser Ratings flagged changes such as the Quality of Advice Review (QAR) and adviser-owned or licensee-centric players.
In the case of the QAR, which saw the first tranche of legislation passed in Parliament in early July, banks may look to leverage their existing business with a platform. Under the second tranche of the QAR legislation, Minister for Financial Services Stephen Jones is encouraging banks to return to advice.
“Banks, with their technological prowess, are likely to re-enter the investment, wealth and advice space. Banks like Westpac (with BT) and CBA (with a stake in CFS) may leverage their existing businesses or create new digital advice and investment platforms.”
Banks may also look to follow the lead of their US counterparts, such as JPMorgan and Wells Fargo, and create an investment platform that is driven by artificial intelligence (AI).
A second change would give greater ownership to the adviser and the licensee as reduced costs mean it becomes cost-effective for them to build their own platform in a way that was previously too expensive.
“Advances in technology and AI may make it more feasible for smaller players to build and operate investment platforms. While advisers are not yet directly participating in the shareholder benefits of platforms, the UK has had ‘adviser-as-platform’ solutions on offer for several years.
“Platforms such as Centric (Findex) and Platformplus (Infocus) have been growing silently under the auspices of their large adviser base. With these platforms being opened up to all advisers, it creates another challenge for platforms.”
Some good points in the article but there’s a significant glaring omission – there’s no conversation about investment considerations. Platforms are about investment execution, but too many choose the platform then the investment.
If I got my Powerball numbers right I’m not going to be choosing an adviser because of the platform they use and it’s pretty app, it’ll be based on the advisers investment philosophy first! Too many SOAs put platform first instead of investment.
Isn’t it amazing that the platforms with the most functionality are 1 and 2. They seem to realise that the role of the platform is to save their cutomer time and that customer is the adviser. The large insto platforms (e.g. Expand) still don’t seem to get this. They think the member is their customer and that only they can protect the member from the adviser. They act more like gatekeepers and for this reason won’t exist 10 years from now. Netwealth, Hub, Centric, etc will destroy them with superior tech while they’re knocking back adviser lodgements for some pedantic reason or requiring forms for direct debit contributions. The nonstop direct communication to clients will only alienate them and the advisers, as it is too much and so poorly written that even a seasoned adviser has trouble working out what they’re saying. Keep ignoring the feedback insto platforms and enjoy the slide into obscurity. Don’t say you weren’t warned over and over again.