Infocus Wealth Management’s move to set up a direct-to-consumer advice business has been almost three years in the planning, and draws heavily on the experience of the company’s managing director and chief executive officer, Rod Bristow, a former chief operating officer for CommSec.
Bristow says direct-to-consumer advice will inevitably become part of the financial planning landscape. Rather than be a passenger process, Bristow says Infocus decided to climb into the driver’s seat.
Drawing on his experience at CommSec, Bristow says he understands there is a way to design an online offering that appeals strongly to consumers and offers entry-level advice.
“My background is CommSec, and I have always been a very big fan of direct-to-consumer businesses,” he says.
“If they are run well … they can deliver very good outcomes for consumers, and can be profitable.
A direct-to-consumer offering is part of the company’s strategy to “improve the lives of Australians from all walks of life”, Bristow says, and is an adjunct to face-to-face advice, not a replacement.
“As you can probably tell, this is a really important piece in the strategic puzzle for us,” he says.
“We think that just having an advice business that delivers face-to-face advice limits our ability to deliver on that strategic vision.”
He says Infocus’s financial planners have received the idea as a means to broaden the advice market, rather than as a threat.
“You’re 100 per cent right in terms of how it could be perceived [as bypassing Infocus financial planners],” he says.
Not just about direct advice
“But this isn’t just about direct advice. From the Infocus group’s perspective we want to get to the 80 per cent of people who don’t get advice today. We want them to understand what this whole ‘advice’ thing is.”
Bristow says researching the new venture included three trips to the US and close examination of businesses there that deliver advice – as opposed to just investments – direct to consumers. Those run by Schwab, Personal Capital and Betterment stood out as offering the kind of service Infocus wanted to offer in Australia. Late last year, Infocus signed up to use Morningstar’s wealth forecasting engine to drive its new offering.
In a statement released this week, Infocus says the wealth forecasting engine is “a dynamic simulator that projects an investor’s future wealth and provides savings rate, retirement age, and asset allocation recommendations for all life stages”.
“The Wealth Forecasting Engine is designed to help users better understand estimated savings and retirement expenses, including the probability of achieving their goals in different market conditions,” it says.
“Assets invested through Infocus’ direct-to-consumer advice solution will be invested in separately managed accounts offered by Ibbotson Associates Australia.”
A different approach
Bristow says this approach is different from the prevailing approach to online advice.
“The pure robo play – do a risk profile and it dumps them into an ETF – is going to struggle,” he says.
The new business is yet to be formally named, but Bristow says it will not operate under the Infocus brand. It will enable a person to “put in some basic information, get a risk profile and if they want to they can invest”, he says.
“We will have some model portfolios they can use.
“Or they can talk to an adviser. We will have advisers who are dedicated to this – this is where the real benefit comes in.”
Bristow acknowledges that Infocus is not the first to market with a consumer offering, but argues that it’s not always the first movers that find the greatest success and that Infocus has learned from the entry to the market of services offered by Findex (Movo) and Yellow Brick Road (Guru).
Head to head
Entering the consumer market potentially puts Infocus head-to-head with some very large, very well-resourced consumer brands. Infocus can’t match these players on scale or marketing spend, so it will have to find other ways to compete effectively.
“It won’t be easy, there’s no doubt about that,” Bristow says. “Some of the other solutions have found it tough.”
He says all advice businesses need to constantly review their advice offering to remain relevant – and in some cases even to remain in business.
“I know ‘disruption’ is an overused word, but market dynamics change all the time and if you stick your head in the sand and think that your business is going to be the same in 20 years you’re already out of business – you just don’t know it yet,” he says.
Bristow says Infocus remains free of institutional ownership and the development of the consumer offering has not been a capital-intensive project.
If the company needs to raise additional capital “it won’t be in relation to this, it will be around funding other growth opportunities”, he says.
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