Asset consultants have become hugely influential over how advisers allocate capital, but CoreData research has found there is a wide variation in practices across the industry.
Presenting data to the Professional Planner Researcher Forum, CoreData founder and global CEO Andrew Inwood lifted the veil on what has become an under-the-radar group managing the portfolios of retail clients.
“The variance in this is so significant that we understood this isn’t one industry,” Inwood said.
“It’s a whole bunch of industries all doing different things at different speeds with different outcomes.”
CoreData divided the consultants into four tiers based on “four Cs” – how much capital is behind the gatekeepers; what capabilities they have; the consistency of processes; and the organisations’ culture.
“The gatekeeper industry is not homogenous, it’s heterogeneous and that heterogeneity increases as you move down the tiers,” Inwood said.
“Tiers one and two, when you look at what they’re doing and how they’re doing it, they look relatively the same.”
| The Australian gatekeeper market | ||
| Scores | Number in tier | |
| Tier one | Above 8.5 | 14 |
| Tier two | Between 7 and 8.5 | 106 |
| Tier three | Between 5 and 7 | 314 |
| Tier four | Under 5 | Unknown* |
| Source: CoreData | ||
Inwood said the opacity of the industry has made it a challenge to research.
“There are no hurdles, essentially, to setting up as an asset consultancy despite the fact that you might call yourself an asset consultant,” Inwood said.
But despite the opacity and lack of standards in the sector, the CoreData research found advisers are “extremely happy” with their asset consultants.
“When I first started this piece of research, I was thinking I’m quite worried about the power that these people hold the way they influence money, the way they do things…it’s sort of concerning,” Inwood said.
“At the end of it, tiers one and two are fine. Tier three is interesting, and tier four is absolutely worrying. The advisers don’t have that impression. Advisers are happy.”
But Inwood noted there was a strong trend of individuals transitioning into asset consultancy from other parts of the advice ecosystem.
“The reality is there are people out there calling themselves asset consultants who last year were calling themselves private bankers,” Inwood said.
“You all know those guys, right? In our last office that we had at CoreData the guy right next door to us was an asset consultant. He’d come from CBA private bank. When it changed hands, he’d simply moved into his own office, taken about $50 million of family money with him and started building that business in his own right.”
A snap poll earlier in the day featuring 50 of the most dominant people in the research industry believe asset consultants and investment committees are the most influential in the construction of investment portfolios, ranking them ahead of licensees, advisers and research houses.
“[The asset consultants] have good communications, they have good outcomes, they have good understanding of what’s going on and they’re very happy with the flexibility and responsiveness to the partners,” Inwood said.
“Turns out that asset consultants and service providers are really good at providing service.”
Inwood said the researcher has kept a keen eye on the top 1000 financial planners, and has “a tight relationship” with 314 of those, to understand the systems they are building.
“The way they’re using managed accounts in these portfolios is really interesting. It’s mimicking what’s happening in the UK,” Inwood said.
“They’re able to stack up these systems really effectively and build a tech stack and an investment stack which allows them to grow.”
While Inwood noted a worrying influx of lower-quality consultants with little oversight, he said many of those top 1000 advice practices are gaining efficiency from using asset consultants.
“They tend to outsource [investment], and they tend to make that somebody else’s problem,” Inwood said.
“What they’re focused on is attaining, acquiring and satisfying their clients and making sure that they move through those processes, so they give those parts of the business away.”
