Platform requirements to shrink market

Some fund managers have expressed concerns that new requirements for product providers are going to make it harder for small boutiques to get their products on to an investment platform.

AMP Capital Investors’ head of retail distribution, Ben Harrop, told Money Management earlier this month that the platform requirements for product providers to prove approximately $15 million in pledged demand from financial planners is going to lead to a reduction in the number of products on offer in the marketplace, and would add a hurdle to the introduction of new products.

Consequently, it would be harder for boutique fund managers to cope with the new requirements, he said.

“If you’re a very small boutique [with] no support, it will be difficult to get [your products] on to a [platform] menu, unless you can have demonstrated demand of that $15 million,” Harrop said.

Like any business, unless you can be profitable, your business is vulnerable, he added.

While there were certain platforms that already asked for proof of a certain level of demand, this was a requirement that was starting to occur across the board, Harrop said.

Jarrod Brown, chief executive of Bennelong Funds Management, said while the demand requirements would not make it harder to get its products on to a platform, it “didn’t feel right ringing around and asking for promises [of pledged demand]”.

“There’s a lot of work to justify support, and I struggle with the concept that you’ve got to work it in with the processes these platforms have,” he said.

“I don’t think financial planners want to be pinned down, I don’t think that’s fair on any party. So we respect the process and what’s intended in terms of making sure product additions to platforms are economical. It just doesn’t feel right ringing up and saying, ‘Hey, would you please promise X dollars?’,” he said.

It also lengthens the process of getting a product on to a platform, Brown added.

Managing director Denis Donahue said Solaris Investment Management was not having any trouble getting its products on to a platform.

Businesses need to invest in their distribution channels, and all distribution channels have requirements to make commercial sense of the products put into the market, he said.

“Every extra fund manager [platform] put on must be costing something, they must know what their break-even point is, and they must have just figured out whatever it is now.”