SMAs, software put pressure on platforms

A Citigroup research newsletter, Trends in Wealth Management, has pointed to two potential risks confronting the dominance of platforms in Australia: the consolidation of the financial planning software industry and the evolution of separately managed accounts (SMA).

The newsletter points to the recently announced acquisition by Iress MarketTechnology of IWL’s VisiPlan and said this potentially placed Iress in a strategically important position in the platform market.

It said that only Macquarie’s Coin operation represented an alternative major player in the paid-for-software market.

The Citigroup newsletter pointed to comments attributed to the general manager of Iress Wealth Manager, Andrew Walsh, that the acquisition created the first independent provider with sufficient scale to invest in both client-driven and industry solutions for the future.

The newsletter commented: “We suspect this could involve solutions that circumvent the platform altogether. Perhaps the nightmare scenario for platform operators is that the adviser keeps the fee margin currently paid to the platform provider and instead uses financial planning software to replicate the platform.

“At the moment though, we understand no financial planning software has a custody module, so this final end game is still probably some way off.”

The newsletter said the second risk to platforms was SMAs — something that had taken the US by storm.

“The question is increasingly being asked whether they have a role to play in the Australian marketplace,” the newsletter said.

“If they have, then this could be another key threat to the current status quo with platforms.”