OpenInvest CEO on being in the ‘right place at the right time’
Melbourne-based OpenInvest chief executive, Andrew Varlamos, believes the firm was in the ‘right place at the right time’ when it came to the uptake of online advice.
In recent months, there have been numerous financial advice practices launching online investment solutions –, powered by OpenInvest’s technology. Varlamos said 27 were already using the technology and a further 15 firms had solutions in the pipeline.
Firms which are already using the technology include Peak Investment Partners, Pascoe Partners, Spark Financial and Lifespan.
The option of an online investment solution was attractive to financial advice firms wanting wanted to help the children of wealthier, existing clients or those who didn’t have the assets for full advice yet. Instead of turning them away, an online investment solution allowed the firm to offer self-directed investing into a managed portfolio.
Varlamos said since the firm was launched in 2017, changes in the Hayne Royal Commission in 2018 made advice more expensive and the number of advisers fell significantly which created an advice gap.
Further changes this year in the Quality of Advice Review (QAR) are also likely to change the space again and improve the outlook for digital advice providers.
In her final QAR report, Michelle Levy said she was “convinced” digital advice tools could make quality financial advice more widely available. However, it was not one of the recommendations included in the government’s formal response earlier this month.
Speaking to Money Management, Varlamos said: “We are a unique proposition and were in the right place at the time. I’d love to say I predicted the future but when we started, the cost of personal advice was high but the regulatory reforms that have come in since we began have made the delineation more extreme between those who can afford advice and those who can’t.
“[Back then] firms could service clients who didn’t have huge wealth but they didn’t have fee disclosure back then which now mean the client segment is uneconomical.
“We didn’t have the view that regulatory change would make things harder but it has done which has made our value proposition more powerful.”
A key target for firms that use OpenInvest’s technology areas younger consumers –; those who may not have the assets for full advice but are still seeking guidance.
“Rather than turn people away, especially young people, by telling them to work hard and come back when they are wealthy, you can offer them a low-cost online solution. That’s a proposition that resonates with firms because every firm has an audience they want to reach and every firm has to turn people away.”
Varlamos described this pipeline of younger investors as an “incubation pipeline” where clients may use the online solution first and then accumulate the assets for full financial advice at a later date.
“Someone might set up an account with $5,000 and through providing them with a regular feed of content, the firm is providing them with financial literacy, teaching them good habits about investing and showcasing their services.
“As their wealth grows, perhaps thanks to the transfer of intergenerational wealth, the argument is the firm will become the logical entity to help them. It’s about who was looking after them before they were wealthy, who provided that solution and there is that sense of loyalty. People will remember who helped them”.
AUTHOR
Laura Dew
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