Advisers will be unwilling to use fewer platforms due to the belief it won’t be in clients’ best interests, according to former Investment Trends researcher and SuitabilityHub founder Recep Peker.
While some wrap platforms are still focused on being able to cater to all client segments, Peker says, the reality is advisers prefer using multiple platforms and believe it gives them the best shot of meeting their fiduciary obligations to clients.
“When we interview advisers or have conversations with them there’s a big reluctance to have just one platform,” Peker tells Professional Planner.
“They think from a best interest [duty] perspective they will never be able to justify everything being with one platform provider. Of course, there is some who believe one is enough.”
Sspecialist players like HUB24, Netwealth, Praemium and DASH have taken on significant inflows since Wexit – when the banks left wealth management – and bank-aligned advisers were not mandated by a particular platform.
Certain platform providers are targeting particular parts of the market with their own strengths. Peker pointed to AMP’s North being focused on the retirement and pre-retirement space, while Mason Stevens is better suited to high-net-worth clients because of its wholesale investment offering as a pair of examples.
“It really depends on what client the adviser wants to service and what tools are needed within the business to serve those clients,” Peker says.
“One of the things is there has been immense competition between the platforms, they’re competing by adding new functionality. For some platforms their idea is to get richer in functionality while others are recognising they don’t need every functionality under the sun [and are instead doing] a certain segment of the market really well.”
The fight over fees
Peker says administration fees are often the core focus for establishing the value of a platform service, but this is only half the picture.
“The way platforms have structured their fees – between fixed fees and tiered fees – makes a very big difference depending on how many clients or accounts that are linked together,” Peker says.
“Some platforms might look quite cheap for one or two clients or accounts, but if you have a bigger family or a structure where you have two family members and an SMSF and there’s multiple accounts across them, the cost can really vary as well.”
Peker says the challenge for advisers is to balance the features in a service versus the cost to the client.
“It’s a challenge for advisers to justify or articulate why should they be using the product with the appropriate features as opposed to the one with the cheaper features,” Peker says.
Peker says the challenge for advice practices is to find a balance between higher priced platforms versus using the cheapest option on the market.
“Let’s help advisers research financial planning products overall but in a way where they can support that best interest duty discussion in a way that’s not dominated by fees,” Peker says.
“If you focus primarily on fees which is what a lot of advisers do… you end having a fee war between the product providers which is not necessarily sustainable for an industry.”
Peker founded the company because he believed due diligence was out of reach for most practices and has further plans to expand into other products, managed accounts and industry funds.
“Fees start to get more complex as they shift away from the headline fees to other types of fees and then at the end of the day it’s not necessarily what the client needs anyway,” Peker says.
“Sometimes they need particular features or access to certain investments as opposed to the cheapest thing. Full due diligence is out of reach for many.”
Raising the bar
Overall, Peker says the standard for being considered a full functioning platform has lifted quite high.
“Platforms in Australia do the core really well – in terms of admin, reporting and custody of investments – but over time the functionality arms race so-to-speak has pushed them to add more and more features,” Peker says.
Research from Investment Trends earlier this year reported a tendency for platforms to add functionality to make a holistic offering, which Peker similarly notes.
“What we’re now finding is that certain platforms are specialising in different ways – certain platforms are trying to become the centre of advisers practices,” Peker says.
“They’re adding adjacent services which you wouldn’t traditionally find on a wrap platform. You almost wonder are they starting to encourage on the space on planning software without necessarily without doing planning but by taking a more central role.”
While Netwealth and HUB24 have been recommended highly by researchers – HUB24 has been this years highest rated platform by Investment Trends and Adviser Ratings while Netwealth has come in second place for Investment Trends after being number the previous year – Peker says there is broad variability within their offerings.
“When we ran our analysis and we put the two platforms side-by-side, what we found is that only 60 per cent of their features overlap,” Peker says.
“They each have a similar number of features – in our research we looked at over 500 different areas – they’re both neck and neck in the number of features they have, but in different areas they number of overlap is different.”