Competition moves to the next level

Hypercompetition will be the next buzz word to come out of the financial services industry with many in the industry believing it cannot be avoided accordingt to Credit Suisse Asset Management head of retail Brian Thomas.

Delivering a presentation on surviving the competition boom, to a packed room of delegates at the recent FPA convention, Thomas outlined the changing face of the industry and the different avenues creating competition.

“Hypercompetition is real and there will be a massive change in the industry over the next ten years,” he says.

A Credit Suisse Asset Management survey of 150 financial planners from small and large practices throughout Australia found 83 per cent of them believe competition will increase in the next five years, while 90 per cent of them expect ability and expertise to increase in the same time frame.

The role of financial planners will be an important one in the changing environment, as managed funds sales via intermediaries increase as consumers continue to need advice in the wake of information overload.

“Big companies thought they could go direct, but it didn’t happen. For example E*Trade, there was no rush to managed funds online,” Thomas says.

The dynamics of the adviser-client relationship will also continue to morph as competition emerges and supply starts to even with demand. Financial planners who identify the need for an edge against their competitors by way of increased services and more face to face interaction coupled with greater technology access, will have greater hope surviving in the long term.

Global trends and the increase in technology are another two areas driving changes in the industry, but according to Thomas there are four key trends pushing hypercompetition in Australia. The death of transactors, the capitalised client value effect, the bandwagon effect and the industry maturation effect.

What Thomas refers to as the bandwagon effect is two fold, taking in the increasing number of people from other industries ‘jumping over’ to financial planning as well as the growing levels of graduates becoming financial planners.

“Ten years ago graduates didn’t want to be financial planners. They wanted to be investment bankers or funds managers. Now a lot of young graduates really want to be financial planners,” Thomas said.

Amongst the changing future industry, Thomas says a super competitor will come onto the scene. Known as Platform Plus it will meet client’s online needs with a sophisticated level of technology while still offering a high quality personalised service.

“The time is right for someone to revolutionise the industry. It won’t be high tech or high touch, but will be both together,” he said.

Lastly, while Thomas says solutions to the hypercompetition issue will be different for every diverse business model, he suggests a number of points to assist practices in the movement.

“The change in the industry will come in a few years. How do you compete? You have to offer more services and develop more multidisciplinary relationships and more complex services.”