Technology key in platform war

Manymastertrust and wrap platforms will not meet their reporting deadlines to financial planners and their clients for the financial year just passed.

That is the ominous prediction of the general manager of wrap products at BT, Mark Smith, who says the technology underlying many investment platforms will no longer be able to cope with the ever-increasing flow of funds into master trusts.

The controversial claim comes as technology, and the ability of master trust and wrap providers to constantly upgrade their systems, looms as one of the key battlegrounds in the increasingly competitive platform war.

If the ongoing problems experienced by the Navigator master trust over its planIT financial planning software is any indication, then technology now goes to the very heart of what is credible in an investment platform.

Last month, Navigator indicated it was no longer specifying an implementation date for the planIT software, which was withdrawn from the market in February after financial advisers reported numerous problems with it.

The claim by Smith also comes in the shadow of the oft-quoted Cerulli report, which in early 2000 predicted that the number of master trust and wrap platforms operating in Australia would be whittled down to just five.

That prophecy is yet to materialise. According to theMoney ManagementTechnology Report survey of platform providers, there are, two years on from Cerulli, still some 15 platforms operating in Australia.

Nevertheless, the threat of wide scale consolidation remains a constant in the platform market.

And, with master trusts and wraps now having to cope with up to 65 per cent of all money flowing into retail managed funds, some are prepared to nominate this reporting season as a key pointer to the ability of platform providers to survive.

“A great litmus test of a platform is its ability to get its reports out on time. I think a lot of people will have trouble getting their reports out on time this year,” Smith says.

The technology underpinning investment platforms is also set to come under increasing pressure from the growing array of products and services being offered through master trust and wraps.

Tom Collins of the Tom Collins Consulting group, which conducted the survey of platform providers for theMoney ManagementTechnology Report, says Australia’s investment platforms have once again spent the past year adding to the already vast range of features they offer.

This was especially the case when it comes to investment options, where so called ‘pre-mix portfolios and fund-of-funds proved popular, being added to the investment menus of master trusts platforms in increasing numbers over the past 12 months.

But the next 12 months will perhaps prove an even more intense period for platform technology, with many platform operators looking to push into as yet untested product areas, such as separately managed accounts.

In April, the Sealcorp group announced that it would offer separately managed accounts through its Asgard master trust from August this year.

Sealcorp director of marketing Kate Mulligan says the push into separately managed accounts, which would need the back-up of sophisticated technology to be viable, had set the benchmark for other master trust and wrap platforms to follow.

“We think this puts us ahead of the market and other groups will be forced to follow,” Mulligan says.

Since Sealcorp’s announcement, Navigator has indicated it has also been assessing its options with a view to launching a separately managed account service in the later half of this year. The AXA-owned Summit master trust has also expressed an interest in developing a separately managed account service, although its plans are more embryonic .

Other groups, such as the combined MLC/National Australia Bank, have also been forced to examine the possibility of offering separately managed accounts through their master trust.

“We have reached the point where [separately managed accounts] are being discussed in the marketplace and we have to consider what our response will be,” MLC adviser services general manager Matt Lawler says.

Such pressure to keep up with the competition will no doubt force master trust and wrap providers to continually assess the technology underlying their platforms.

The crucial question now, is whether the issue of technology will force the type of consolidation in the investment platform market predicted by Cerulli.

“I think Cerulli will generally be proved correct,” BT’s Smith says.

“The only area where I have an issue with Cerulli is that, in many cases, advisers are tied to certain platforms and that will keep some of the smaller ones in business a lot longer, although technology will continue to play a key role.”