Expect platform market to shrink as consolidation hits
There is likely to be increased platform consolidation in the market, according to two industry leaders, as a result of smaller revenue margins and high barriers to entry.
Speaking at the Citi conference in Sydney, Matt Heine, chief executive of Netwealth, and Andrew Alcock, chief executive of HUB24, agreed the industry would be smaller in the future.
Alcock said that while the number of assets under management would continue to grow, there would be fewer players.
Alcock said: “It will be a smaller market in the future than it has been. The barriers to entry are high and the revenue margins are smaller than they were 10 years ago. There are challenges to strategy, to ownership… it has to be done so you will definitely see consolidation, the writing is on the wall”.
Heine agreeing, saying revenues were “a fraction” of what they used to be.
Heine added Netwealth had explored consolidation opportunities but found it more difficult than expected, although the company would consider smaller bolt-on opportunities such as its partnership with fintech data company Xeppo.
“On paper, the numbers can look amazing but the practicalities are different.”
“Consolidation is hard, it is not just a cut and paste job, there are cultural, practical, technical issues involved that are very complex.”
However, this did not stop him seeing opportunities for other companies which he said would have a knock-on effect of being beneficial for Netwealth as those firms would be distracted by completing the deals and unable to make new developments.
Regarding the Quality of Advice Review, both said the review presented a great opportunity for platform providers.
Heine said: “It will take 12-24 months to come through but it is a great idea for the industry. It will reduce barriers to entry, make advice cheaper, ensure digital advice can survive and thrive and that’s all good for platforms. If banks come back then that creates distribution opportunities for platforms as well”.
AUTHOR
Laura Dew
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"the review presented a great opportunity for platform providers" ...enough said