Mat Walker, Praemium’s chief commercial officer for investment advice company, is the first to admit that all parties in the value chain are under increasing pressure.

What has changed in recent years, he says, is jostling that’s happening among value chain participants has become less about taking margins out, and more about taking costs out.

At a time when cost of advice is front and centre, as the wealth industry tries to solve the conundrum of how to get quality advice to more Australians, the whole wealth ecosystem is focused on what is a reasonable cost for advice and how much advice businesses need to be strong and sustainable.

Indeed, each participant in the value chain is realising that they can only be paid for the services they actually provide, and advisors are realising that they can take on some of the investment management function to increase their margins, Simon Hoyle, CoreData’s head of market insights highlights.

Hoyle joins Walker as part of Professional Planner’s latest podcast series, The Shape of Advice, to discuss the topic entitled ‘Reimagining the value chain.’

Hoyle has witnessed a fight for margin emerge over the years, with fund manager’s margins being squeezed as their traditional roles are taken over by other parties, such as platforms.

“It looks like it’s the investment manager that’s getting squeezed again,” Hoyle says, pointing to the implementation model that’s continuing to evolve.

This shift comes as the cost of advice rises due to an increased compliance and regulatory burden on the advisor post-Royal Commission, he says.

“I don’t think there’s many players across the industry who are still in big-fat, lazy margins anymore. They’re all working pretty hard for their money,” Hoyle says.

As new operational structures are developed and people work out where their areas of expertise lie, people are working out what resources they need to bring to the table, Hoyle says.

The trick, he says, is to understand how links in the service chain inter-relate, where some elements of the chain aren’t being transparent about taking margin and where this is being earned from. “Because ultimately the consumer that pays for all of this, and you don’t want to drive costs up too much and price advice out of the reach of the consumer,” Hoyle adds.

Value within budget

The broader industry is also grappling with whether there’s a legitimate way to cut compliance and regulatory burden costs and take some cost out of the advice delivery, which is yet to be seen.