Platforms are gearing up to launch low-cost options to compete directly with industry funds to address advice affordability, according to research from SuitabilityHub.
The firm’s ‘2024 Platform Market Wrap’ report found there is a focus on improving client outcomes via low-cost options such as CFS Edge Accelerate 100 and HUB24 Discover.
Managing director Recep Peker tells Professional Planner those two options have an attractive total cost which competes well with profit-for-member (otherwise known as) industry funds.
“It means if you have a client with a relatively simple situation, they don’t need all the bells and whistles, they don’t have complex investing needs, there’s a nice alternative for you as an adviser,” Peker says.
“The benefit is, if you have client funds on one or two platforms, it enables the adviser greater administrative efficiency whereas if you have the client funds across multiple platforms and multiple industry funds at the end of the day that does increase the cost to serve clients.”
Peker says there are multiple levers that advisers and platform providers could pull, and this can vary from going with lower cost options for lower balance clients, but also articulating the value of higher cost products.
“Generally speaking, what’s seen as the easiest lever is the fee lever, is discounting the product,” Peker says.
“If everyone is competing on fees and we end up having a fee war, it ends becoming a race to the bottom and you end up with an industry that is not profitable.”
Alternatively, Peker says, it could also be the case of the core platform proposition no longer being profitable, which means platform providers must rely on other revenue streams.
“We saw in the UK where Aviva Wrap initiated a big fee war between platforms and now it’s gone to the extent where some platforms are adopting vertical integration again by building their own adviser distribution,” Peker says.
“If you go too cheap as a proposition and you’re no longer profitable then you have to make money in other ways.”
This could include foregoing platform fees and instead making money on transaction fees or investment management fees.
“The revenue mix gets shifted and overall, it means the industry isn’t as transparent around the total costs,” Peker says.
‘Uberisation’ of platforms
The report also found that platforms are “rapidly” modernising their digital capabilities in the same way as apps such as Uber, so advisers can efficiently self-serve and track tasks in real-time.
“What we mean by this is consumers [and] advisers in their everyday lives use modern apps like Uber and Amazon, where not only can they place instructions online with a few taps but then get real time tracking and monitoring of where their orders are up to,” Peker says.
He added these trackers have meant platforms need to digitise more tasks so more instructions can be placed online.
“There’s more of a trend towards straight through processing relationship between the adviser and the platform in the interface and then without any human interaction the platform executes it, where human interaction is required then the task tracker comes into play,” Peker says.
The best changes of the year
The report cited the top three innovations of the year as updates to AMP’s North and CFS’ Edge and First Choice.
North added fractional shares in managed accounts which Peker says would enable advisers to recommend SMAs to lower balance clients further democratising client access to the investment vehicle.
CFS Edge added the ability to divide client accounts into sub-accounts, which helps deliver flexibility in implementing advice strategies.
For CFS’ older platform, FirstChoice, its origination journey facilitated in Elementa and integration with Xplan has delivered time savings when opening platform accounts. This included pre-populating data from Xplan and setting up multiple accounts across a family group in one go.
“There’s a lot of innovation in the industry and it’s hard to pick the favourites but the main thing is that sometimes simple things can be very effective in helping the advice process,” Peker says.
“You don’t need to build complicated or expensive functionality as a platform provider to better help advisers service clients.”
