Key considerations for choosing a platform partner
Adviser business models have remained fairly consistent in the last decade. This doesn’t mean there haven’t been significant changes to business processes, but the change has mainly been forced upon practices by legislation as firms worked through FoFA and the Royal Commission.
However, we continue to see a seismic shift in client needs and the expectations they have of their advisers that could equally impact a firm’s bottom line. Investors have an increasing amount of information at their fingertips and the ability to complete their own research before embarking on their investment journey. Access to robo-advice solutions is also providing low entry levels to those wishing to start investing. With 75% of consumers preferring to self-solve their customer service issue, providing a digital solution as part of their value proposition is becoming increasingly important for advice firms in servicing this changing client profile.
An exciting opportunity is a well-documented fact that in the next three decades, $3 trillion in assets will move from one generation to the next in Australia. In the US, the transfer is estimated to be well over $30 trillion, and worldwide the figures are staggering. The question is, how well placed are practice owners to take advantage of this wealth shift, given statistics show that 90% of inheritors typically change advisers upon receiving their inheritance? Retaining the next generation of clients is a significant challenge for the advice industry, to ensure profit and business valuations are maintained.
Assessing the landscape
Managed accounts, and importantly the choice of technology platform partner, can help practices on both these fronts. However, not all managed accounts platforms are the same. As such, when business owners and practice managers research the market, they need to be very clear on the differences.
The platform landscape has changed significantly over the past 25 years. In the early 1990s, we saw the development of Master Trusts as the first platform structure to consolidate investment execution and reporting and simplify the investment experience for investors and their advisers. Next came wrap platforms, which facilitated broader investment choice (e.g. listed securities), broader overarching reporting across super and ordinary investment savings, lower investor costs, greater advice fee collection functionality and the introduction of adviser- and dealer-level model portfolio functionality. In more recent times, many wrap platforms have, with varying degrees of success, attempted to add on SMAs and associated functionality. This has been a difficult undertaking for some since the technology requirements for running non-unitised, actively managed investment portfolios are fundamentally different from wraps, which are essentially investment administration services.
The way has been paved for groups such as Praemium and others innovating at a fast pace to deliver deeper solutions such as the next-generation platform which caters for custody and non-custody solutions on a single platform to deliver more efficiency and client engagement than ever before.
A next-gen integrated managed accounts platform includes simple and consolidated reporting of all investment assets (including custody and non-custody); broad investment choice with ease and flexibility to make changes; tailored solutions for every kind of investor; administrative accuracy and efficiency; and the benefit of platform scale in the form of very competitive fees at all levels.
This change has happened extremely quickly, as planning practices seek greater efficiency to better respond to legislative change and client demands that are putting pressure on existing business models. The need to understand the complexity of each platform and understand how new systems will assist in increasing profits, drive client engagement and minimise risk is imperative for planning practices. This is especially prevalent as institutionally restricted practices open up their APL opportunities and move to self or independent licensing environments and need to compare and assess next-gen solutions with their wrap counterparts.
Therefore, choosing a platform in future will undoubtedly become more of a strategic business decision than a tactical investment solution. Should business owners and practice managers get it right, though, the effect on profits can be significant.
6 considerations when selecting a platform partner
It’s important to have a clear idea of what you want to achieve in your business, now and in the future. By defining your value proposition and having a clear strategy for how you want to engage with your clients and the service you want to offer, you will be better able to select a platform that can help you meet your objectives. So what are some of the key considerations when choosing a managed accounts platform?
1. Strategic alignment
The platform you use should be reflective of how you want to run your business, now and in the future. Considering the values of the company you are partnering with and their philosophy will help to ensure your platform of choice is strategically aligned with your own business values and direction.
2. Scale
Does the platform provider have robust, scalable and innovative technology designed to run managed accounts and pass on the benefits of growing scale to your clients?
3. Clients
Will the platform enable you to meet the needs of all or at least most of your clients? Will it provide you and your clients with a holistic view of their total wealth? And importantly, does it allow your business to offer an innovative and professional looking digital service that will enhance your client engagement.
4. Best interest
In today’s environment, you want to ensure that the platform you are choosing for your clients meets your best-interest duty. Competitive pricing is important but that shouldn’t be the only consideration. Does the platform support outsourcing and provide broad choice, features and functionality to underpin strategic advice strategies?
5. Growth
You don’t want your business to be limited by your platform’s functionality. Can the platform support a growing client base and range of advice models, retention strategies and your service model?
6. Professional support
Finally, you want to ensure you have the right support to get the most out of the platform. What is the onboarding and account management programme and what ongoing education and training are offered?
With the right technology partner, your business can go from strength to strength. Giving considered thought to this partnership as a strategic decision aligned with your business values and goals will also ensure your business remains sustainable, growing and relevant into the future.