It’s highly likely that BT Financial Group’s Panorama platform will be the smartest, most-fandangled wrap when it’s finally completed. So far BT has only delivered a cash hub, but plenty of additional functionality is promised.
BT believes the platform will be “game changing” – and so it should be given Westpac’s mammoth investment, estimated to be in excess of $250 million. That’s substantially more than any boutique financial services company could afford to spend (and then some).
The enormous team behind Panorama should deliver a great result. But will it be $250 million better than the investment and administration solutions some small advisory firms are building?
Contrary to AMP’s second submission to the Financial System Inquiry (FSI), which claimed that “only vertically-integrated companies have the financial capacity to invest in the development of new and high quality financial advice solutions for consumers”, some of the best innovations have come from independently owned groups. Consider Asgard, one of Perth’s greatest business success stories.
Asgard was established in 1985 to help planners more efficiently interact with product providers. It grew to become the industry’s pre-eminent master trust, before being sold to St George in 1997. Similarly, dominant financial planning software provider Xplan was created by a small independent organisation.
A lot can be achieved when people are forced to work with less.
Rival to institutions
Another example is the spate of new unified managed accounts (UMAs) or discretionary managed accounts (DMAs) being built by boutiques to rival institutional platforms.
Managed accounts aren’t new, but their popularity is growing because investors want cheaper and more efficient ways to build portfolios.
When Fortnum first set out to develop its e-Clipse UMA, it briefly flirted with the idea of also building a managed fund supermarket.
e-Clipse has the flexibility to hold a broad variety of investments including cash, shares, managed funds, term deposits and property. But clients are primarily invested in a “core” portfolio of ASX-listed large-cap stocks with exchange-traded funds (ETFs) and listed investment companies (LICs) used to gain exposure to other asset classes.
A managed fund supermarket would provide investors with efficient access to other “satellite” opportunities in the small and micro-cap space as well as alternative asset classes.
However, Fortnum quickly concluded that it couldn’t build a solution that was either better or cheaper than the wraps.
Enter the new mFund Settlement Service from the Australian Securities Exchange (ASX). It allows investors to buy and sell unlisted managed funds using the ASX’s clearing house electronic subregister system (CHESS). Fortnum plans to use the mFund Settlement Service as part of the e-Clipse UMA.
To date, only 24 (or 10 per cent), of the funds on Fortnum’s approved product and service list are mFund participants. That will expand over time.
Test the service
To test the service, I recently invested $20,000 in two mFunds: PIMCO Diversified Bond Fund (PMF 02) and the PIMCO Global Bond Fund (PMF 03). The order was placed via Bell Direct’s Desktop Broker, with confirmation of the transaction received immediately and contract notes issued within three business days. The cost of that transaction was just $60 ($30 per trade), with no ongoing administration fees.
The catalyst for Fortnum building e-Clipse was growing demand from new and potential clients for direct investments, flexibility and transparency. Advisers wanted a more efficient business solution and a better deal for clients.
e-Clipse investors pay 19 basis points on portfolios up to $1 million, 14 basis points for accounts between $1 million and $2 million, and zero beyond $2 million plus a $198 annual administration fee.
Fortnum’s asset consulting business, Innova Asset Management currently builds and implements a range of model portfolios and separately managed accounts, but over time the goal is that advisers will also have the discretion to select investments according to a client’s agreed investment program.
It is all part of the evolving needs of the market.
Despite their deep pockets, institutions don’t always have the best ideas.
Boutiques on the other hand need to secure adviser support before embarking on any project.
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