Financial product innovation in Australia has suffered in recent years as a result of platforms focusing primarily on regulatory-driven reform, says Kelly Power, BT Financial Group’s head of platform product.
“I think the level of discretionary investment outside of regulatory change has dropped,” Power says.
“Focusing on implementing regulations is a significant cost for us [as an industry].”
Power’s comments are supported by figures from Investment Trends, which show declining expenditure on product development by platforms. It found Australian platforms spent $100 million developing new product functionality for financial planners in 2012, down more than 30 per cent from $130 million in 2011.
While 2013 figures have not yet been released, Professional Planner understands that they have followed the same downward trend.
“The dollar amount that has been invested in platforms has probably increased [over this time], but it has instead been invested in compliance, not only for us [at the platform level] but our advisers,” Power says.
She believes this is an unintended consequence of the Future of Financial Advice (FoFA) reforms “and legislative change more broadly”.
“There’s been a significant focus on embedding the changes over the last few years [for platforms],” Power says.
Power refers to the raft of changes that have affected platforms, including conflicted remuneration legislation, new capital requirements for super products and a platform review.
However, she expects to see a substantial spike in platform product development in the second half of 2014, as the industry emerges “from the congestion of change we’ve had to implement.”
“There’s been a different type of product development…although I think that will change after 1 July,” Power says.
“You’ll start to see more innovation, more focus on our customers right across the industry.”
Power says BT will be focusing on improving their online systems both for end-customers and advisers.
“We’re working through new types of investments for clients and getting our Lifestage funds onto our platforms,” she says.
Power says BT will also look at how it can make its dealer groups more efficient by “supporting them through dealer group modelling capability – to essentially run and rebalance those, taking away administration effort from advisers, so they can spend time doing what they do best.”
