Making smart traders smarter

Wealth - where to next?

30th November 2018
Wealth - where to next?
Arnie Selvarajah
Chief Executive Officer
Bell Direct

As the Royal Commission puts the spotlight on outdated, vertically-integrated models, customers are turning to IFAs for more transparency and control.

Amazon founder Jeff Bezos once announced a plan to encourage people to buy "everything" on Amazon. Google has been gradually eliminating the need to visit individual websites, and Facebook wants to run our social lives, online and offline.

The recent spate of data leaks, election hacking and fake news has started a growing trend of people moving away from these 'one-stop-shops', preferring to keep their service needs and personal data separate.

We are seeing a similar trend emerge in the financial services industry, as the Royal Commission has zeroed in on vertically-integrated models, where institutions both make and sell financial products.

While this model was once hailed as a great evolution in the financial services industry, post the Royal Commission, having all your banking, superannuation, financial advice and online broking under one roof has become less desirable.

Clients are increasingly demanding greater transparency and openness in all aspects of their wealth management - from accessing a greater range of investment options, to the ability to move between providers as needed. This requires access to liquid structures, portability and open architecture.

The push for greater efficiency

For financial advisers who employ the right technology, the next wave within the industry presents a real opportunity to create genuinely tailored client experiences, while building the scale needed to continue to grow in the face of greater compliance and regulatory pressures.

Looking for a solution, many advisers have been turning to managed accounts. According to IMAP's Managed Accounts FUM Census (1), funds under management in managed accounts grew by 9% in the six months to 20 June 2018, with an annual year-on-year growth rate of 30%, taking total FUM to $62.43 billion.

While IMAP chair, Toby Potter, noted that over half that increase is the result of organic growth, this is still an impressive result, indicative of the push to deliver better practice efficiency among advisers, along with more precise client outcomes.

Technology bringing advisers and clients closer

As more advice businesses implement built-for-purpose technology, this is opening up new markets for advisers who were previously hampered by the cost of providing face-to-face advice. Many advisers are now able to service the growing 'middle market' of clients who are seeking guidance on their wealth management, rather than a full, comprehensive financial plan.

Managed accounts are also helping to reduce adviser administration, with options including automated portfolio management, rebalancing and real-time portfolio updates freeing up more time to focus on client education and strategy.

Open-architecture solutions are also catering to the growing number of investors who are seeking greater transparency and control over their investments. Some of the attractive features of these products include direct ownership of assets rather than just beneficial ownership, individual holder identification numbers (HINs) for better security and flexibility; online logins so portfolios can be viewed in real time; and ease of customisation and switching between products.

So in the current environment, it's out with the old and in with the new breed of investment solutions - and rightly so. It's about time the industry puts the power to customise back in the hands of advisers and their clients.

(1) IMAP/Millman, as at 30 June.