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Forward Thinking Magazine : December 2010
4 Macquarie Adviser Services The chief executive of the Financial Planning Association of Australia, Mark Rantall, says post-GFC, advisers are facing the reform agenda. “There are a number of issues affecting advisers including the FoFA and Cooper reforms, which are having a significant impact on the way they operate their business,” he says. “The move away from a commission-based business will also impact how they structure their business and if they are not already fee-based then they will need to review their value proposition to clients.” He adds the opt-in proposal is another significant proposal that is adding to the administrative burden. New solutions are being developed to help advisers deal with the need to change their business models while ensuring the advice they provide to clients does not suffer. In particular, the type of platform that advisers use to deliver investments and deal with administration is evolving. What will this platform of the future look like and how will it enable the optimum solution to be delivered to both adviser and client? Managing Director of Strategic Consulting and Training (SCAT), Jim Stackpool, says the platform of the future will be a partnership platform which will enable advisers to get back to doing what they are best at – planning. “Advisers will need to become a client’s best business partner; clients need advice more than they need products,” he says. “The new platforms will have to help increase productivity. We’ve had the ones that help with administration, such as IMAs, but we need ones that allow advisers to increase their face time in front of clients.” In an ideal world, every client would have their own customised portfolio of investments, which are managed according to their changing circumstances in a timely and cost-effective manner. In the real world, advisers construct and administer their clients’ portfolios in a number of ways, often depending on the size of their practice. Typical methods include wrap accounts, separately managed or individually managed accounts, do-it-yourself super funds, industry funds, and for high-net-worth clients – a private bank service. Macquarie’s Head of Insurance and Platform Justin Delaney says the most popular way to administer accounts has been through platforms and master trusts. About 80 per cent of the investment money handled by advisers in Australia goes through platforms and this is where most of the focus regarding new development is occurring. One of the major concerns of advisers is how they can sustain their business as it moves from a commission-based system, where payments come from recommending products, to a fee-for-service situation where they are paid to provide advice to the client. “I believe the platform of the future is where an adviser can choose a solution that is right for their client and enables them to exercise choice but without overloading them with the burden of administration,” Delaney says. “Whatever solution is used, it needs to be able to evolve as the customers’ needs change.” While a key driver for platform development can be technology, Delaney says end-user engagement is also important. “Clients are becoming more empowered – and regulators are assisting this by taking a paternalistic approach to how advisers deal with them,” he says. Clients are also becoming more educated about financial matters and understand the mechanics of saving and investing. This enables them to talk more knowledgeably with their advisers about their requirements. Whereas previously, financial advisers may have only recommended managed funds, the recent fallout in the markets and the fact that some funds were frozen and inaccessible, have investors seeking alternative assets. “Share ownership is very high in Australia and many people like the feeling of ownership and transparency that comes with a direct holding in a company. From a planning perspective, managed funds have always offered an efficient way of implementing a financial plan for advisers, however many clients are demanding alternatives,” Delaney says. This increased interest in direct equities has led to advisers becoming aware of the need to offer them in order to stay competitive. “Advisers are telling us that they expect to use alternatives to traditional managed funds in the future, and direct equities are top of this list,” Delaney says. “Equities can be quite painful to manage so advisers need to have the right platform. They also need to offer a choice that aligns with a client’s expectations and needs.”