Innovation, by definition, requires some method or process new to a specific environment, usually ahead of its time.
Clearly, the improvements and upgrades that platforms are currently undergoing are set to define what future offerings will look like and will undoubtedly widen the innovation gap between providers.
According to the Investment Trends July 2011 Planner Technology Report, financial planners are consolidating the number of platforms they use, to achieve a more efficient business process in this pressurised environment of investor demand and regulatory reforms.
Please CLICK HERE to download a PDF of this Special Report Recep Peker, senior analyst at Investment Trends, says the report finds that the needs of planners are evolving, with planners naming, on average, 8.5 developments or improvements they want in their platforms.
“We had a group of advisers coming out saying they wanted a more efficient and low-cost solution overall from their platforms, while there’s another group saying they want a more comprehensive solution for more complicated clients,” Peker says.
“The way this fits in with the broader trends in the industry is that there’s a general shift in the industry where more planners are focusing on the higher value clients. But then there is another group of planners saying they will be focusing on single-issue advice or simple advice more often. So these two groups have quite distinct needs that come through.”
Some of those needs are new and platform providers have either not thought about the particular issue or have not released that particular function yet, according to the report.
Peker says that it’s more about financial planners’ needs evolving rather than being dissatisfied with the current offerings.
“Financial planners and the industry as a whole is evolving very quickly and this obviously puts pressure on platform providers to quickly move in and meet their needs,” he says.
“For example, we have a group of planners wanting SMSF [self-managed superannuation fund] establishment, SMSF management and administration and SMSF reporting.
“So I wouldn’t say it’s a shortcoming of platform providers. I would say it’s just how dynamic this environment is.”
Peker says the areas where the satisfaction has increased are where the innovation has occurred, and it’s had a positive impact on adviser perception.
He says that the report also high- lights a big focus on efficiency and lower- cost products.
“The offerings of a lot of platforms are getting very good and as a result, it’s easier to substitute one platform for another,” he says.
“When you have multiple platforms on your menu, it’s more of an inconvenience to have your clients spread across multiple platforms, so what advisers will end up doing is that they will stop put- ting new inflows into some platforms and favour others.”
Peker says that in such an environment, platform providers must ensure they become a financial planner’s primary platform.
“By becoming somebody’s primary platform, you can quadruple the level of flows you get,” he says.
“A primary platform receives 73 per cent of platform flows versus a secondary platform receiving 17 per cent of plat- form flows, so it makes a big difference.”
INNOVATION GAP Martin Spedding, executive director of DST Global Solutions (Bluedoor), says there will be a significant innovation gap over the coming years as the pace of change continues relentlessly.
“The market becomes really divided between those that are reacting to change and those that are really driving it,” Sped- ding says.
“It’s a really exciting era for advisers and for platforms because there are great opportunities to really differentiate and innovate.”
He says the gap will close further into the future, but at this point in time there’s an opportunity to differentiate.
Bruce Hawkins, general manager of MLC Wrap Platforms, says the cost of competing effectively in the market is growing at a time when investment mar- kets are impacting funds under management (FUM) across the board.
“So it’s going to be harder for some of the smaller players to invest into the systems to keep them competitive mov- ing forward,” Hawkins says.
“One of the benefits that MLC has achieved [from] bringing together Custom and Navigator onto the same platform is suddenly a lot more scale efficiencies that come into play that we can pass back through reduced fees, investments into our systems and ongoing innovation on the platform side.
“When you look at the key players, that will be a very competitive space. But when you look at the next level down, it’s going to be hard for them to compete and continue to invest in the systems when the returns aren’t there.”
Steve Burgess, general manager, platforms, at AMP-AXA, says new technology and its capability to deliver more features at a reasonable cost will ultimately be the catalyst for a wider in- novation gap.
“That’s certainly what we’re finding with North,” he says.
“It’s written in a modern language, from a technology perspective, it’s highly configurable, [meaning] you can change things relatively easily and be quick to market.
“Platforms that languish on old technology in the future will fall further behind because it will be increasingly expensive to develop on.”
Burgess says staying on old technology platforms is not only expensive but will create problems when platforms find that, after complying with regulatory change, they are not able to afford innovative product changes.
“By the time you just finish keeping the lights on, there’s usually not a lot [of money] left for you to do much that’s new and fresh,” he says.
