Technology that equips self-managed super fund advisers to compete effectively with larger institutional players will be a major source of disruption in the advice industry over the next few years.
Darren Stevens, director of product management and strategy for Bravura Solutions, told the SMSF Association state technical conference earlier this week that platform providers underestimate the impact the newcomers will have on existing businesses
The story of the next few years “is going to be around what the fintechs are going to do to platforms”, Stevens said.
“I deal with a lot of the platform providers, and they feel somewhat apathetic about it,” he said.
“They feel like they have got a monopoly and they are not taking account of these guys. They are like water in the cracks. They will find any area that’s got friction, got margin and got opportunity for them.
“I think you’ll see more coming out of block chain and Bitcoin, which is creating a … registry environment which doesn’t need an intermediary like a bank or a platform provider. And those things are going to have a more dramatic impact, particularly in the longer term.”
Stevens says entry to the market is simple for fintechs because they are “coming in with no legacy”.
“That’s another reason – the platforms take a while to adopt some of this,” he said.
“They’re very heavily restricted by legacy technology that they have got bolted together, that doesn’t facilitate streamlined, real-time interactions. And some of the predictive analytics work they are doing, while it is interesting and nice, they are still struggling to put it into practice and bring it out to marketplace.
“You are seeing the peer-to-peer lenders spring up left, right and centre; the fintech boom is there and there’s money for people to get investment to bring these things to market. A lot will fail, but there will be some that certainly pick up and go forward.”
What they are most scared about
Stevens said feedback from Bravura’s UK office is that “what they are most scared about at the moment is the entrance of the big fund managers from the US coming in with very low-fee platforms integrated with roboadvice”.
“They’re talking about free platforms, with no platform fee at all, and 10 to 15 basis points for the investment cost, all up,” Stevens said.
“They’re worried that a big player like a Vanguard or a Fidelity is going to come in, and create a B2C market and go to town.
“Could that happen over here? Yes, I think it could.
“Do I think there’s going to be a non-traditional player come in? We saw Virgin struggle. We’re a bit of a fickle [industry], we’ve grown up, we’ve got some really big players that dominate, we’ve got some fringe players that have their niche markets. I think we’ll see some of those niche players come through.
“But the big platforms are all feeling fat and happy at the moment, and I think there will be room for disruption. And I think the self-managed superannuation fund market is worrying them a lot. You can see that through their activity around product and servicing models and trying to get personal with their members.”
Stevens said that the key to harnessing technology effectively for smaller businesses is to understand the advice business model, and where advisers genuinely add value.
“And then, how do I create that more holistic environment?” Stevens said.
Seamless, holistic, solutions
“And what things do I need to bolt in to my environment to create that seamless, holistic solution for [clients], where I am providing the strategic advice that sits in the middle, and some of the more commoditised pieces, and roboadvice, et cetera, are things that I can buy from providers at a relatively cheap price and provide that in, hopefully branded up and looking like it’s my proposition.”
Stevens said overcoming the limitations of legacy systems involves two major challenges.
“First of all, selecting the right platform – which is the right one going forward?” he said.
“Which one is the modern technology base? You hear people talking about APIs [application programming interfaces] or web-based services. They need to be architected in a way that is a) customer-centric, and b) allows for integration.
“So web services allow for standard integration methodology between various platforms and providers, that can work in real time. And if your software isn’t providing that and isn’t architected around the customer, you’re always going to struggle.
“And the next biggest issue us how do I, in a cost-effective way, without disrupting my existing client base, migrate my data across? There are a lot of tools out there now that are being developed.”
