Heavy users of master trusts come clean on their appeal

master trusts master trust platforms financial planning financial planning practice BT cash flow

21 March 2002
| By Nicole Szollos |

There is no denying the popularity of master trusts has continued to grow over the years. One look at funds inflows will show even the most hardened critic that master trusts and wrap platforms still take the hot seat when it comes to client funds.

And it is also no secret which are the big names in town, with Norwich’s Navigator master trust, Sealcorp’s Asgard master trust, MLC’s Flexiplan and Masterkey products, and BT Portfolio Services wrap still taking the lion’s share of client funds.

There are scores of advisers across the country channelling large and consistent streams of client investments into master trust and wrap vehicles. So what is it about these products that make them so successful, and will the success continue?

Crosbie Warren Sinclair principal Mark Alexander is one adviser who’s been riding the master trust wave for about seven years now. The accountancy and financial planning firm has $65 million in the Asgard master trust, with about $20 million annual inflow.

Alexander says the popularity of master trusts in general rests with the platform’s overall functionality, administration and electronic capabilities.

“Flexibility, simplicity and consolidation, those three things bundled together are the key points for both the adviser and the client,” he says.

For Alexander, the choice of Asgard as the master trust vehicle for his financial planning practice was tied into joining the Securitor dealer group, and the total package on offer. But Alexander says benefits of Asgard specifically include the flexibility of fee structure being tailored to the adviserNET system, and the wider menu ranges of Asgard.

Another popular product provider is MLC, with its Masterkey and Flexiplan master trusts.

The Australian Central Credit Union (ACCU) is one of the big writers of business into MLC products and currently has two-thirds of its $300 million funds under management flowing into master trusts.

ACCU wealth management head Stefan Lipkiewicz says its focus on master trusts stems from its desire to provide an efficient platform for the credit union’s 200,000 members.

“The focus is on customers, and master trusts provide them with good consolidation information, consolidated reporting and flexibility,” he says.

From the business perspective, Lipkiewicz says the reduction in time spent on back-office issues, product selection and portfolio construction means greater business efficiency for advisers.

He says it was the “breadth of offer” from MLC that drew the ACCU into an alliance with MLC.

“They offer all the tools needed to build a good model for clients, and deliver the holistic advice model we want to offer clients to help them achieve their goals,” he says.

Listed financial company InvestorGroup also has $200 million in its fledgling master trust platform, the BT wrap product it has named WealthWrap.

“We have experienced the fastest inflows into the wrap product. It is a key platform in how we deliver financial services on an ongoing basis to clients,” Investor Group Investor Financial Planning chief executive officer Tim Townsend says.

Townsend also recognises the broad appeal of master trusts and the platform’s success, pointing out the cost efficient access to mezzanine funds, the enhanced user experience via technology, and the ability for greater business focus on the value add to clients, as some of the drawcards.

“The bottom line is all parties benefit,” he says.

Investor Group entered its master trust relationship with BT early last year, choosing the fund manager for its experience, as well as the product’s efficient interfacing with Investor Group’s existing business. In the relationship, Investor Group has signed up in the contract with the provider and client, even though it is cheaper for the group to exist outside the contract as the promoter.

“It is a strategic decision when you make a commitment to one provider,” Townsend says.

Likewise, Haintz Financial Services principle David Haintz has struck up a new relationship with MLC, and after seven months, the business has $35 million of its total $45 million funds under advice in the Masterkey product.

The independent financial planning group recently switched from Navigator’s discretionary master trust to the non-discretionary MLC product, after honing in on key value add strategies within non-discretionary master trusts and, specifically, Masterkey.

For Haintz, the appeal of master trusts is economies of scale and the ability to take on more clients because back-office administration is outsourced. Reasons for choosing MLC Masterkey include its managing the manager process, greater diversification and the $20 million a year spent on analysis and research.

The past 10-years has certainly been a high time for master trusts, but what does the future hold?

One common idea amongst advisers is that the master trust platform, as it is known today, will continue to grow and evolve into an improved, multifaceted platform commanding most, if not all, of retail client investments.

“In the next 10-years, master funds and wraps will be the only investment vehicle in the retail investing market,” Alexander says.

The ACCU predicts the emergence of a more holistic approach to master trusts.

“Where we are heading is integrating all the existing platforms together, resulting in a total advice platform that delivers risk, investment platform, debt, cash flow, estate planning, tax planning and CRM,” Lipkiewicz says.

There already seems to be a push towards growing businesses and channelling new money into master trusts, illustrated by one of Haintz’s business targets to have all funds under advice running through the master trust platform within 12-months.

But while this development remains to be seen, the dedicated users of master trusts ensures the continued popularity of the platform, many of which will embrace whatever change may happen.

“Will the popularity of master trusts continue? The concept, yes, but there will be changes,” Townsend says.

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