The future of platforms

Peter Labrie outlines some of the key evolutions that will affect platforms in the years ahead.

Platforms have come a long way. What began with investment portfolio administration and reporting has expanded to broader, more complex functionality such as model portfolios, client segmentation and revenue tools and enhanced online adviser dashboards.

While there has been a significant amount of development over recent years, we have also seen a degree of commoditisation across the platforms industry, particularly in the areas of fees and standard platform functionality.

As we move into a post-Future of Financial Advice (FOFA), fee-for-service environment, platforms will need to continue to evolve their offerings in order to stay relevant and competitive. I see four key areas dominating platform development over the coming years:

• Improving business efficiency for advisers and licensees;
• Broadening investment solutions offered through platforms;
• Supporting investment and planning solutions for the growing retirement segment; and
• Assisting advisers in demonstrating the value of their advice to clients.

Improving business efficiency

With the implementation of FOFA and changes to adviser and licensee revenue models, we are seeing a much greater focus on improving operational efficiency in the advice businesses we partner with.

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This is consistent across Independent Financial Adviser (IFA) groups and our aligned licensees.

To assist advice businesses, platform providers need to provide tools that make the delivery of advice simpler and more efficient, and align their platform with the advice process as much as possible.

We are already seeing examples of this, such as electronic submission of paper-based forms and straight-through processing between advice software and platform providers. 

Continuing to improve these developments will be important to supporting advisers and licensees as they look to build scaleable, efficient business models that position them for long-term growth.

Broadening investment solutions

As advice business models change, so do their platform needs. There has been greater demand in recent years for alternative investment models to the traditional structure of individually managing client portfolios.

Advisers and licensees have looked to make their portfolio management processes more streamlined for many reasons, such as:

• Improved efficiency – less time spent documenting and executing investment decisions means more time to spend with clients;
• Reduced risk – quicker execution of an investment change means less risk to client portfolios; and
• Reduced costs – reducing the cost to deliver advice allows advisers to service a broader range of clients.

As a result, we have seen greater use of scaleable investment implementation structures – for example, model portfolios and centralised investment management structures, such as separately managed account and individually managed account-style arrangements. 

Retirement segment solutions

Over the last 40 years, approximately 48,000 people turned 65 in Australia each year. Over the next 20 years, this number will jump to approximately 127,000 per year.

This represents a great opportunity for the advice industry, as many clients will seek advice as they approach retirement. 

The retirement segment also brings with it a particular set of challenges. Investment manufacturers, for instance, are still grappling with how to provide investment solutions that solve the various risks faced by today’s retirees – adequacy risk, longevity risk, sequencing risk and so on.

Having historically concentrated largely on solutions for investment and super accumulation clients, platforms must develop their offering to advisers for servicing retiree clients.

These services may come in various forms, such as retirement-specific investment solutions, goal-oriented client reporting and improved connectivity with Centrelink to help manage client benefits.

The solutions are still being developed, but there is no doubt this will be a significant area of focus in the platforms industry for the foreseeable future.

Helping advisers to demonstrate value

Historically, platform enhancements have largely been aimed at advice businesses.

The feedback we’re now receiving consistently from advisers, however, is that there’s more platforms can do to help them provide demonstrable value to the end investor.

Platforms have begun doing this and early examples we’ve seen include providing advisers with investor resources and materials that can be adviser-branded and enhance online functionality and reporting for investors. 

In an environment where clients are becoming more engaged with their superannuation and more cost conscious than in the past, platforms can do more to assist advisers demonstrating the value of their advice offering to clients.

It’s early days, but I expect this theme to be a big part of the next evolution in platform developments. 

The last few years have brought a significant amount of change for many advice businesses.

Platform providers are well placed to help advisers and licensees deal with the challenges brought on by these changes and continue supporting them in delivering quality advice outcomes for their clients.

For me, the goal for platforms is relatively simple: to continue developing solutions that deliver genuine value to advice businesses, giving advisers more time to spend with their clients planning for the future.

Peter Labrie is the head of FirstWrap and investment products at Colonial First State.