Kathy Vincent, BT General Manager, Platforms and Investments

This article published in the May print edition of Professional Planner was produced in partnership with BT.

Kathy Vincent remembers well the day BT slashed headline pricing on its flagship Panorama investment platform to 15 basis points, a move that precipitated a fierce and sometimes contentious price war between the major players in the adolescent industry.

“That was announced in my first week,” Vincent (pictured) says, recalling her induction as general manager of BT’s platforms and investment division in mid-2018. “We were just crazy busy.”

Since then, it’s fair to say that a lot has transpired in advice. During 2019 the Hayne royal commission played havoc with the institutional advice ecosystem and advisers struggled through both bruising regulatory upheaval and a taxing new set of educational requirements.

Then 2020 came, and the world changed. For the platform industry, something else changed as well. Once the pricing war subsided and the industry settled on a much softer cost band, platform providers found themselves competing on something advisers value just as much, if not more, than modest pricing; functionality and service.

Call it the third great growth spurt in the platform industry’s rapid development. First there was the technology, then came the cost equalisation. In 2020 – and could there be a better time? – the focus is now on how to make the platforms more practicable and serviceable.

A BATTLE OF PRICING AND TRANSPARENCY

When the investment platform’s pricing war kicked off in mid-2018, BT paved the way with its move to a 15bps asset-based administration fee and an attendant media blitz.

According to Vincent, who had literally “just walked through the door”, the focus at the time was as much about transparency as it was pricing.

“We took quite a leading position in making the explicit choice to make platform pricing more transparent,” she says.

“To some extent price will be a dynamic that advisers will always contemplate in terms of best interest duty, but we wanted to take a stance on being as transparent as we could and talk about it more.”

At the time, the industry had its technology in place. BT, in particular, had invested heavily into making Panorama the most prominent platform on the market. Yet increased margin pressure at every level meant the industry had to adjust to lower, two-tiered pricing.

“That was the next wave,” recalls Mark Hoven, chief executive at Adviser Ratings. “Having twin offerings based on functionality and price.” After BT moved on pricing its major competitors followed, including AMP’s MyNorth, MLC’s Masterkey and IOOF’s Pursuit. For advisers and their clients, the clarity of simple-to-understand, cheaper pricing eased the strain.

“Clients in the old days used to pay through the nose,” says Troy Macmillan, chief executive at TWD Advisory in Perth.

“Suddenly they were getting the most incredible technology at such a low price.

“It was easy for clients to understand what they were being charged as well,” Macmillan continues, reflecting on the sweeping changes in the platform industry.

“Clients could look and say ‘well, that’s a fair cost; they’re providing great reporting, I can transact on assets and it’s a real value add’.”

WHO CAN DO IT BETTER?

In the wake of platform providers adjusted their pricing, advisers started facing a barrage of extraordinary challenges including new education standards and a wave of regulatory upheaval stemming from the royal commission.

“The advice industry in that period had a confluence of events involving a changing regulatory environment and a tough business environment,” Vincent says, adding that advice businesses became “introspective” as the conditions inhibited growth.

The demand for platform services continued, but once price considerations became negligible advisers began focussing more on what the platform could do. The desire for functionality and efficiency was heightened to counteract the other pressures they were facing.

“It’s definitely changed, pricing isn’t really part of it at all now,” Macmillan says. “We obviously try to find a low-cost provider but that’s not so important anymore because most have come down so much, they’re all competitive.”

The next development in platforms had arrived; after the technology build and the price equalisation, the central question became: who can do it better?

THE FUNCTIONALITY FACTOR

Over the last 18 months, the platforms advisers have gravitated towards the ones that work the best, that offer them the efficiencies they need to keep their clients happy and to help them run an efficient, profitable business.

It has to be functional, it has to perform well and it has to be seamless.

Vincent says that at BT there was an early acknowledgement that digital enablement was going to be a key theme. They forecast a “high propensity for digital usage”, with the successful platforms being the ones that “propel a more productive business model for advisers”.

It’s what led the team at BT to create a tool that creates records of advice at the point of trade – something advisers have long coveted from their providers.

“When we talk to advisers we always focus on ensuring we capture their thoughts on our development,” explains Vincent.

“The key theme we found in particular given the regulatory environment was helping them be more efficient and helping with compliance, that’s what informed out decision on the ROA tool.”

TWD Advisory’s Macmillan validates this perspective, noting that the way platforms are constructed these days means clients have more visibility through self-directed portals, so it has to present well.

“The important thing is the innovation and the functionality – it’s got to look good for the client,” Macmillan says.

“This is especially the case with younger clients; it’s got to be dynamic, it can’t be some ‘old-world’ platform.”

As platforms shifted the competitive battleground from price to functionality, advisers again came out on top.

“Now you’re getting the most incredible technology for such a low price,” Macmillan continues.

“You can hold off-market assets and the reporting functions are amazing. It used to be such a manual process but that’s a thing of the past.”

SERVICE DELIVERY THEMATICS

As advisers have honed their requirements for a platform provider, the level of service provided has become less of a secondary factor and more like a key plank of the value proposition.

The people that manage business development between advisers and platform providers do much more than facilitate sales in the modern game; they are a vital link between the adviser and the technology, managing everything from technical assistance to product availability, pricing and trade queries.

Hoven says that in 2019 Adviser Ratings received over 2500 adviser reviews on platforms. The thing advisers kept coming back to, he recalls, was service and the people who provide it.

“A recurring thing was that advisers were recognising and rewarding the platforms where service levels were highest,” Hoven reports, noting that

“BDMs who were high touch” were rated the most positively by advisers.

“They were actually calling out the names of BDMs in our feedback,” he adds. A big reason service has become such a vital part of the offering is the shift towards managed account enabled platforms, which provide high levels of efficiency but can take a while for some advisers – especially time-starve and resource-strapped independent ones – to implement and understand.

Part of the service wrap for the better platforms is having a tech-savvy team of people ready to help advisers transition to these managed account systems.

At BT, Vincent says the success they’ve had in building net market flow volumes is as attributable to these ‘transition’ teams as it is to the product itself.

“It’s a real testament to our focus in terms of the type of technology and initiative we’ve invested in, but also the way we service the adviser community and the dedicated focus on transition teams,” she says.

BT Panorama had the largest net flow among retail platform products in 2019 and reported an average new flow of $1.06 billion every month by October.

“The dominant theme for a few years now has been managed accounts, and to be fair that’s connected to the delivery of service through the platforms,” Vincent says. “It’s truly played out to be an important thematic and an area we’re heavily invested in.”

A VERY DIFFERENT ENVIRONMENT IN 2020

While the COVID-19 crisis has led to a plethora of challenges in financial services, the advancements made by the platform industry in the last 18 months both in terms of functionality and service have been a blessing for financial advisers and their clients.

The things advisers value in a platform – everything from investmet choice to reporting, managed account functionality and up-to-the-minute valuations – have become even more critical because of what Vincent calls “the immediacy of what’s occurred”.

As things move rapidly the ability to react just as swiftly is crucial.

Vincent reveals BT have seen an 80 per cent increase in the usage of their ROA tool since January, which speaks to an acceleration towards “contemporary and next-gen solutions” since the crisis started.

Just as startling is a 43 per cent increase in usage across the Panorama platform between February and April, largely attributable to unprecedented levels of volatility in the period. “We’re in a very different environment right now,” Vincent comments.

And while the immediate future is unclear, Vincent believes the platform industry will continue to evolve in a direction that will be led by the changing needs of advisers and their clients.

“I think the current period is going to drive greater digital enablement versus where we’re operating at today,” she predicts.

“We’ll also see more creativity around a virtual working place, so I’ll be thinking about how we can contribute to thinking around that and develop better solutions.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at [email protected]
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