Investment and superannuation platforms were “light years ahead” of where they began several decades ago and the technology now promised unprecedented levels of engagement and customisation for investors, an FSC Technology Series Workshop has been told.
By Lachlan Colquhoun
Andrew Alcock, the Managing Director of HUB24, told the Workshop that platforms were “going to the next phase” of connecting customers to global investments whilst giving them new levels of control and choice.
“There has been a massive leap in terms of the technology challenging the unitised model, and now we have managed accounts where the investor owns the asset, and the next level of technology is about connectivity,” Alcock said.
“Technology has enabled people to engage with their outcomes, their retirement savings, in a way they never used to before.
“And technology is creating this engagement which itself creates consumer expectation and demand which challenges the status quo.”
He envisaged an “app-based world” where investors had the ability to “plug and play,” filter their investment choices and asset allocations in an “open eco system” where customers were not tied to any one platform.
The panel moderator, David Brown, the Head of Global Client Coverage at the Royal Bank of Canada, set the context for the evolution of platforms.
Describing them as the “original fintech” when they emerged in the late 1980s, Brown said they were the “cornerstone technology” for the modern-day advisory offering, which had moved through the mastertrust and wrap phase and into the era of managed accounts.
As at January 2018, Brown said there was $821 billion in funds under administration in Australian platforms, 48 percent of which was in the accumulation phase of superannuation with 32 percent in the retirement phase.
The second panel member, Lisa McCallum, the Executive General Manager of Platform Services at the OneVue Group, said that in addition to delivering “dynamic asset allocation” options for investors, platform technology was also driving down costs for users, both for investors and advisors, and also saving time.
She welcomed infrastructure developments such as the New Payments Platform as a catalyst in driving down costs and putting “lazy money” to work through the ability to transfer funds in realtime, rather than waiting three days for cheques to clear and funds to be honoured.
“There is far too much lazy money in the value chain,” said McCallum. “It takes too long to get money from the investors’ account and into the investment itself.”
OneVue, she said, had recently researched which banking provider was making best use of the NPP, and the firm was about to change its transaction banking relationship so as to deliver fast transfers to its customers.
Technology, she said, was also the solution to driving down costs to allow people with smaller balances to invest. Where it has been uneconomic for some platforms to take investments of less than $20,000 or so, in future costs would come down so that people with as little as $2000 to invest could use the technology.
HUB24’s Andrew Alcock gave the example of managed accounts as another driver of efficiency and lower costs.
Investors were now able to move money between different funds inside their managed accounts without the “buy and sell spread drag” which would previously cost them “40 points to get in and get out.”
Referring to McCallum’s comments on the NPP and fast fund transfer, Alcock made the point that many of the current and future changes in the platform business would be “driven by data.”
Where previously platforms had been custodians of funds, they were increasingly moving to also be “custodians of data” which – when tied to technologies such as Artificial Intelligence – could deliver new layers of value to investors and advisors.
“The regulators are pushing in that direction, and the technology is driving us there,” he said.
The industry, however, had some catching up to do despite its advances.
Reputationally, and as an industry, we probably let ourselves down by not using technology as well as we could.”
The industry had lived in a technology “status quo” which was being challenged by a number of factors, such as customer expectation and also by regulators.
“The industry has to catch up in some areas,” said Alcock.
“It can’t be acceptable that it takes years to find out who received a piece of advice or a product, the solution has to be technology and data.”