The amount of insight platform providers can bring to the table is underutilised, a panel discussion has heard.
Speaking at the Professional Planner Licensee Summit last month, BT chief executive Matt Rady admitted platforms could do a better job at providing insights.
“We’re servicing half the industry with a whole bunch of information,” Rady said.
“We have not done a good job of providing insights to licensees on investment performance, adviser performance, on adviser performance… on a whole bunch of things we could do. That’s also expensive.”
Research from Investment Trends and Finura Group earlier this year noted advisers were looking to platforms to deliver a holistic suite of services and information.
HUB24 chief executive Andrew Alcock said the boundary for what platform providers will continue to blur because technology can create alpha by driving efficiency within its service.
“Those traditional lines about ‘that’s a platform, that’s the advice tool’… blow it up, throw it away, because quite frankly the threads go through and they don’t live in those boxes,” Alcock said.
“We can add value to advice review process by giving you simulation tools and help you with your review that typically would have been in advice software or ROAs [records of advice]. If technology can create an outcome, lower the cost and create utility for a consumer or an adviser, licensee or manager… bring it on.”
Alcock said he doesn’t see the “boxes we try to put around services” as being real.
“In our managed accounts we’re not just doing asset administration, we’re creating alpha to some extent through technology,” Alcock said, pointing to example of doing more than just the bare bones service.
“We’re adding value to investment manager’s IP [intellectual property]. Platforms never did that before and that to an extent is helping an adviser get a better outcome for a client.”
Matt Rady noted the evolution of platforms that started as an “investment supermarket” but has turned into a back-office provider for managed funds or managed accounts.
“We’re providing administration services here to manage portfolios, but the reality or the big shift in the industry has been that financial advice has outsourced investment management and investment management is being administered on platform.”
All in the family
The most recent data from Plan for Life, which measured the platform sector at the end of last year, found BT was the second largest platform provider with $160.9 billion in Funds Under Management.
HUB24 held $55.8 billion in FUM, but the smaller provider experienced 11.7 per cent growth over the year, while BT declined by 11.3 per cent.
The contrast paints the picture of two different paths of platforms that were rated in the top five for Investment Trends platform benchmarking report earlier this year.
While HUB24 has acquired client portal service MyProsperity and SMSF service provider Class, BT let go of its super business to Mercer, as well as letting go of the Principals Community in 2021 and the Viridian and Securitas licensees in 2019.
It was left with its Panorama platform that parent company Westpac unsuccessful put for sale over the past two years. The bank announced last month it would retain and invest in the Panorama asset.
Alcock noted the purchase of MyProsperity was strategic because the company saw advisers spending upwards of $4000 a week on managing privacy.
“We identify things that happen in adviser practices where somebody’s [had their identity stolen] and tried to change a bank account, we see that kind of stuff all the time,” Alcock said.
“Most of the attempts to steal money from our platform actually come through an advice practice and a breach there. Very rarely does it get past – never say never – so we’ve got teams to think about that way. We spend $30 million above the line on IT a year and money below the line.”
The usage of client portals is anticipated to rise with email becoming an outdated and unsafe way to communicate sensitive information.
However, Rady noted the person paying for the fees for BT services are the clients, which is different to MyProsperity as a service.
“What you’re starting to see there is a combination of both client and adviser pays, so that’s an interesting potential trigger point,” Rady said.
Footing the bill
Fortnum Financial Group managing director and CEO Neil Younger said the customer in the platform space traditionally does include the client, but also the adviser because of the delivery of an administration service into the client.
“But the client is paying the total basis fee,” Younger said. “If you start to think about a future state for platform businesses, where again, some of the development that will potentially come [like] client engagement tools etc. Those services have a different customer being the adviser, not the client.”
Younger noted the struggles for licensee business in designing the best configuration for fees to the adviser.
“In days gone by when the whole value chain was bundled together, that wasn’t always the case, the client was paying the fee,” Younger said.
“Somehow it found its way through the value chain and we took some of the margin. The tide has gone out now and we have to charge the adviser for our services and therefore justify the value of those services. Does that not speak to an evolving model in the platform space?”
Home improvement
When it came to licensees investing in tech, Younger said there’s an obligation for licensees to invest – whether that is by being an enabler or a vendor.
“Each of those approaches has some pros and cons, but it’s fair to say we’ve all gone to invest,” Younger said.
Infocus founder and managing director Darren Steinhardt had invested in the development of a connectivity app for software and platforms that would ease many of the efficiency constraints for practices, including the notorious fee consent regime.
“It’s not a fee consent solution, that’s just what we’re using it for,” Steinhardt told Professional Planner in the lead up to the summit.
“It’s a digital signatory solution that feeds into a CRM and into product which means we can then put application forms and all the other documentation that advisers every day are using to approve things.”
