Talk to many financial planners about the gestation of BT’s Panorama platform and chances are there’ll be eye rolling and smirking and a comment that half a billion dollars is a ridiculous amount to spend to prop up ageing technology.
Westpac subsidiary BT Financial Group will indeed have spent $600 million or so by the time the Panorama launch is complete. But viewing its development solely as a buttress to existing technology, particularly BT Wrap, misses a bigger strategic picture for the Westpac group.
John Shuttleworth, general manager, platforms and investments, for BT, says the investment in Panorama is partly defensive, to protect an existing market position, and partly to capitalise on expected growth in both superannuation and non-superannuation wealth markets.
But he says it is also part of a business transformation that, once bedded down, will cut operating costs by about $100 million a year.
“If we can just, over a seven-year period, get those cost savings post-migration, that would cover the cost,” Shuttleworth says. “If you look at the simplification side of our business, you’ve virtually covered the investment in Panorama through cost savings alone, without revenue growth. But with revenue growth, if we’re more successful in self-managed super funds and things, we can do better. It’s a completely acceptable kind of investment proposition.”
The need to simplify
Shuttleworth says the genesis for Panorama was the need to simplify the structure and operating systems of the Westpac wealth-management business. Renovating BT Wrap would have cost not much less than the ground-up Panorama build but would not have had the same transformative effect on the business.
The Westpac wealth-management business covers more than 50 different products and platforms, supported by seven separate operating systems. Shuttleworth says that after implementation and migration for Panorama, the group’s structure will be simplified from more than 50 products to three, from four superannuation trustees to one, from 12 super funds to one, and from seven registry systems to one.
“Don’t think of it as an additional product or platform, think of it as a core operating system within BT. We are basically going to run our entire business on it,” Shuttleworth says.
“We have a range of different portfolios. We have investments outside of super, we have superannuation, we have self-managed super funds and we have integrated insurance. Whether you are a direct investor, an advised investor or [engage] through an employer plan, you’ll be on this operating system. So the customer experience is configured for the investor but all the core infrastructure is one standard operating system.
“Then we’ve got [the model portfolio functionality, which incorporates] all the different asset classes around cash, term deposits, managed funds, individual portfolios or separately managed accounts, listed securities and tailored portfolios. And we’ve…spent
a lot of time on the user experience.”
Shuttleworth says BT has spent just less than $400 million on Panorama to date and at the end of the project will have spent “just north of $600 million”.
“We’ve done the build and we’re in the migration phase now,” he says. “There’s a little bit of super still to build, and then there’s the migration phase. So the total investment is significant, but…we’ve taken our whole wealth infrastructure, connected it to the bank and gone through a massive simplification project, which is why it’s costing us a reasonable chunk of money.”
To put that outlay into perspective, Shuttleworth says BT generates annual revenue of about $2.6 billion a year. Building Panorama wasn’t aimed only at generating growth, but also at protecting the group’s existing revenue base.
“If I took just superannuation and investment, we’re north of $1 billion in turnover, at pretty reasonable margins,” Shuttleworth says.
He says the Panorama project has reached “a really exciting phase”. But with a $600 million investment to justify, the stakes are high, even if the prize is valuable.
A play for growth
The total value of all assets in Australia is estimated to be about $11.3 trillion, of which about $6.7 trillion is regarded as non-financial – essentially, housing. BT is making a play for a slice of virtually everything else – the $2.1 trillion invested in superannuation, and the $2.4 trillion of assets held outside superannuation. BT’s current platform business has assets of about $130 billion, and a market share of about 20 per cent. Shuttleworth says the scope for growth is immense, despite ongoing pressures on margins.
“There’s so much opportunity and upside that we see in the business,” he says. “One of the things I guess the whole wealth industry is fortunate about is that…there’s this mandated, legislated growth that is basically built in. There’s a responsibility managing the money, and there’s also margin pressure – what we’ve seen with MySuper is quite a lot of pressure as prices have come down – but it’s a phenomenal amount of growth.”
Panorama will probably take about seven years to pay off, so BT is bargaining that it isn’t usurped by new technology. Shuttleworth is convinced the group has some breathing space, and says key domestic competitors are not obviously investing in technology or are scaling back their ambitions. Competition may emerge from overseas, however, and Shuttleworth says part of the Panorama strategy is positioning Westpac to meet it head-on.
“While we’re investing, others are divesting,” he says. “ANZ has decided to get out. MLC is selling its life business. But they’re all dealing with the same complexity.
“You wonder whether or not we’ll get another overseas player or someone stepping in. I think it’s too attractive a market for that not to happen. But we’re not seeing a lot of competitors spending a huge amount. AMP, having bought AXA, has got North; we understand that, whilst they’ve been doing some investment, it’s tailed off a little bit.”
What users will get
Shuttleworth says there will be no impact on advisers or clients as Panorama comes online and existing systems, processes and products migrate. The process of migrating BT Wrap onto the Panorama system is on schedule to be completed this calendar year.
When that happens, clients and advisers will have access to “all the new features and functionality”, Shuttleworth says.
He says BT has done “a little bit of work” with advice practices to assess the impact of the change but it has not yet quantified exactly what efficiency gains there might be for advisers. More will be done to help advice practices – starting with Westpac’s own – improve how statements of advice are created and “that whole front-end, robo-advice solution”.
“They’re doing work on the digital advice engine. So the next evolution of the platform will be to take that process of building the SoA and integrate it directly with Panorama.
“What everyone hates is re-keying, so we have to be able to interface and download into Coin and Xplan, but if you have a simple interface, that’s nirvana – because so much of the adviser’s time now is spent just dealing with crap, basically.”
Shuttleworth says that at the completion of the Panorama roll-out, Westpac will have addressed the inefficiencies that tend to plague financial services and wealth-management operations built on legacy systems and acquisitions. He says the group is confident of avoiding a repeat of the “creeping complexity” issue, having become the first Australian institution to adopt the Swiss
group Avaloq’s underpinning technology.
“The reason we bought the underlying technology is you can run virtually any asset class on it; whereas, many systems are account based,” he explains. “The fundamental system we have is so configurable, it’s hard to imagine there’s any product we couldn’t run on it.
“Because you’ve got that in as your operating system, connected to the trading, it would make no sense at all to say, ‘I’m going to put a new system in.’
“Now that’s up and running, it’s more, ‘What’s the incremental development effort to get a new product or a new feature onto the platform?
“When we get the Comparator data and we look at our own operations versus some of our competitors’, believe it or not, we’re still the lowest cost on a cost-per-transaction basis today, but we think we need to get it down so much further, based on where the industry could go, to be able to sustain our profitability in the face of margin pressures.”
