Institutional platforms stifle competition
Financial services players have taken aim at competition concerns and potential conflicts in institutionally owned investment platforms.
Ibbotson Associates head of adviser services Matthew Esler said "certain platforms" were pushing investors to use their own investment funds by preventing "like fund" competition on their platforms - particularly with multi-manager options.
Matt Heine, managing director of the non-institutionally aligned Netwealth platform, claimed bank-owned platforms were stifling competition.
"The risk in the current environment is that platform fees and, more importantly, platform ownership is making it increasingly difficult for non-aligned managers to get exposure on menus, models and, in the most extreme cases, multi-manager offerings," he said.
"This issue is compounded when you look at other platform components including risk, cash and term deposits, margin lending and broking services," Heine said.
Yellow Brick Road chief operating officer Bryn Nicholson said vertically integrated providers and large institutions were "effectively [directing] their advisers through their control of platforms to sell products that may not actually be the best product for the client".
Connie McKeage, chief executive of OneVue, a non-institutionally aligned platform, said she believed the rate of inhouse product being sold on institutionally owned platforms was a cause for concern.
"How can you argue that your own products are 80 out of 100 per cent of the time the best product for the client? I find that very hard to get my mind around, mostly because I don't think it's feasible and everybody knows it's not feasible."
The Australian Securities and Investments Commission (ASIC) has proposed changes to the regulation of platforms, including the requirement for platform operators to disclose how they select financial products for inclusion on investment menus or in model portfolios.
Nicholson said such disclosure would be "a really useful thing, to be able to pick apart some of the effective tied distribution arrangements that are implemented through platforms".
Matrix Planning Solutions managing director Rick Di Cristoforo said it was "pretty obvious the only real criteria for inclusion on platform lists is commercial, so additional transparency would be good".
Macquarie Bank head of life Justin Delaney said Macquarie was "happy to disclose the process behind the products that sit on Macquarie Wrap to those who ask".
"We support transparency and have an open criteria, with no default or preferred funds."
IOOF's general manager of distribution Renato Mota said IOOF disclosed its process and was "generally supportive" of the initiative.
AMP and Colonial told Money Management they don't disclose their process for selecting funds.
Chris Stevens, general manager for Colonial First State Custom Solutions, said the proposal was "inconsistent with the established policy position which treats platforms as a service rather than a product".
"The platforms operator's role is not to make recommendations or give assurances regarding the investments made available on the platform," Stevens said.
BT Financial Group's head of platform Kelly Power said that while BT had "no problem disclosing and being transparent about our process, the concern we're raising through the FSC with ASIC is that disclosing the process may be seen as us recommending funds".
Meanwhile AMP, CFS, BT, IOOF and Macquarie all said advisers could compare like funds on their platforms, including multi-manager options. MLC said advisers were able to compare funds on MLC platforms by reviewing the Product Disclosure Statements for each product.
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