Finding the path through the tech wilderness
There appears to be disagreement in how technology such as software, administration and support systems and even investment platforms, are used and how industry groups tackle the subject.
BT Financial Grouphead of customers and business services Geoff Lloyd says one of the biggest stumbling blocks is the idea that technology will solve most problems.
“There is no IT magic dust, it is just part of the strategy where applications are the ends, not the enablers,” Lloyd says.
“Applications are not components that provide a single solution, but better components in a total system do enhance the adviser’s role.”
According toAusmaqchief executive Richard Burrows, products are often developed with the assumption that an IT department’s technology fix can make the products work.
But he says such a view is expensive in a market constrained by complex tax and legislation.
His view is shared by other industry players such asAustralian Skandiamanaging director Ross Laidlaw who says technology has in many instances been a failure in the financial services industry.
“Technology has failed many groups because it is not seen as part of a business solution and should be seen as partner at the business end,” Laidlaw says.
However, Lloyd says this is because many people have placed the wrong empahasis on technology.
“As an industry, we have over-intellectualised on the execution issues. We need to encourage usage of technology, [it’s] not a case of ‘build it and it will be used’,” he says.
As a person charged with rolling out technology to advisers,Associated Plannerschief operating officer Paul Campbell says that when it comes to distribution, the issue is beyond many advisers who seek out the system that works for them and their clients, rather than the absolute best system available.
“Financial advisers are not large businesses and while they are good at sales they can be technology illiterate and dependent on dealers,” Campbell says.
“But they do look at what has been invested in technology systems and are looking for the payout as promised. With markets down, income down, advisers are looking at the tools they use and they want to do more with them for less.”
Lloyd says this is now becoming an issue because in the past “there was too much excitement about the massive endgame and trying to produce the magic result”, a situation Burrows also criticises and calls upon technology providers to consider rolling out strategies carefully.
“Standards are critical but projects seldom work with a big bang development style. Incremental approaches tend to work better and have a better chance of ensuring projects will end up where they need to be,” Burrows says.
The issue of standards is important because currently there is much duplication of systems and services in the industry according to Campbell, who says this has been driven partly by competition.
Yet this situation is unlikely to change, Lloyd says.
“This is because there are a range of adviser desktops and different evolutions in business and if back office technology can’t satisfy the needs of advisers, the desktop solutions on offer won’t either,” he says.
Rather, Lloyd says he looks forward to industry models where products are independent of distribution channels and distribution channels are independent of products.
“At present this would be a nirvana but if there was a core system that would do this, a top layer interface could then be used to allow for the differences between users,” Lloyd says.
DST InternationalMD Ian Mathieson says that while this new model may not happen, new models will arrive due to the ongoing growth of the financial services industry.
“With the growth to come, the market needs to do something different in what is has to offer. This may mean more established players may be better placed to act and may drive some small players to promise high but deliver low,” Mathieson says.
According to Count Financial Group senior research strategist Michael Spurr, any growth must be tied in to focusing on profitable clients by retaining values-based servicing and using technology focused on data management.
“This is already being done by advisers and technology is helping them to work better compared with a base service of just placing investments. However, for the same amount of fees they will need to offer more, even for high-net-worth clients,” Spurr says.
And it is not a situation that is about to change. Laidlaw says with recent history of the local market, low cost players who came into the industry during good times are now finding it hard in a system which almost drives people to advisers.
But Mathieson says reducing the costs of technology is not about the hardware itself but reducing the number of people required to work the system. The back-office should handle exceptions only, with the focus being on the front end of the business.
But will the industry ever find the Holy Grail of technology systems in the market — straight through processing from adviser desktop to fund manager back-office?
Burrows says it is certainly possible but not until the industry deals with the unsecured systems it maintains and the paper trail it leaves behind.
“There are standards for STP in place but there are barriers in the retail market such as authentication — managers and platforms need to be comfortable with large scale redemptions electronically and at the moment, this is not the case,” Burrows says.
But as Mathieson says, in 12 months it will hopefully be a better market and therefore more money will be available to be spent on these issues.
“The focus should be on saving now and creating good product for better days, correcting inefficiencies in processes, not technology, and finding there is no killer application but rather the correct course of action,” he says.
Burrows says the lesson learnt is: “Never leave a recession with the same technology with which you started it.”
Money Management would like to thank Geoff Lloyd, Ian Mathieson, Richard Burrows, Ross Laidlaw, Paul Campbell and Michael Spurr for their participation, and DST International for their assistance in organising and hosting the discussion.
AUTHOR
Jason Spits
Recommended for you
Far too few wealth managers are capitalising on the opportunity presented by disruptive technology to deliver personalised investment solutions to the mass affluent demographic, according to PwC.
With over half of advisers using managed accounts, HUB24’s head of managed portfolios has unpacked the benefits driving their usage and how they can be leveraged by advice practices.
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
ASX-listed platforms HUB24, Netwealth, and Praemium have used their AGMs to detail how they are using artificial intelligence to improve their processes and the innovative opportunities it presents.
