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Forward Thinking Magazine : December 2010
6 Macquarie Adviser Services The menu of choices available to stay informed is infinite, accessible and bounded only by the amount of time people have to access them all.” One way to drive revenue is through segmenting clients. Advisers need to think more carefully about how they are going to look after clients who require different levels of service and what they will offer them. This is where model portfolios may be useful. Model portfolios include a set allocation of assets that are designed to suit particular segments of an adviser’s client base. Traditionally they tended to focus on managed funds but the new generation allows for direct equities to be included. Macquarie Wrap is trialling its new model platforms that enable advisers to offer direct shares and managed funds [see description opposite]. Stackpool says the adviser that spends his or her time picking investments for each client is rare. “The GFC shows that the adviser doesn’t have control over these assets,” he says. “The adviser’s primary focus should be their client, and they should engage experts to best focus on the secondary focus which is the client’s money.” He says portfolio management and modelling tools have made advisers more productive so why then waste time researching and choosing individual assets? “My advisory clients don’t see the point in fiddling around $80 to $100 tasks such as processing buy and sell orders,” he says. “They are increasingly outsourcing these low-value tasks. Every client needs a customised approach but the achievement of their outcomes is far more important to them than the purchasing and processing of financial products.” Delaney says whether advisers want to adopt model portfolios or not depends on the way they manage their practices. “Model portfolios are another tool to help with practice efficiency,” he says. “The benefit to advisers is all about enabling the efficiency of running a single platform solution but with the ability to customise it for each client – and without adding to the cost.” Peker says the continual improvement in integration between platforms and planning software is one driver behind new solutions as well as the improving tools to support defined scope and limited advice. He says if the Government’s FoFA reforms are implemented, advisers say that they intend to provide holistic advice more often (43 per cent), provide defined scope/limited advice more often (27 per cent), and provide more transactional (one-off) advice (23 per cent). “On the technology side, there has been a shift to advisers seeking efficiency gains from providing simpler advice and doing client reviews,” he says. “Advisers said that if product providers (such as platforms and planning software providers) streamlined things, they could save the most time on preparing comprehensive SoAs (25 per cent), preparing limited advice statements (11 per cent), and reviewing client investments (10 per cent).” The researcher is releasing a report in November that will reveal two in five advisers would consider switching to a platform that can help them better administer the Government’s ‘opt in’ reforms. The Investment Trends October 2010 Adviser Business Model Report is based on a detailed online survey of more than 1,300 financial advisers conducted between 19 August 2010 and 10 October 2010. The report shows that the market share of platforms will not only be determined by which group can offer the best transition from commission-based to fee- for-service, but that about 40 per cent of advisers have said they will choose a platform from the provider that can best help them administer the opt-in arrangements. The opt-in arrangements refer to where a client physically opts in to pay for advice annually. Other considerations that will influence advisers’ decisions to choose a platform are whether those platforms will help reduce the cost of doing business, charge lower platform fees and provide more access to lower cost products. FPA’s Rantall says one of the issues surrounding platforms concerns the unbundling of advice from the platform and product. “Payment of advice needs to be transparent,” he says. “Many advisers are now moving away from embedded commissions. There are lots of issues and opportunities coming up for advisers, many revolving around trust and transparency.” Despite the developments occurring in the industry, there may be advisers who prefer to believe the commission-based model will prevail. However, it appears clear that the reforms to the industry will be implemented and advisers need to adapt their business models if they don’t want to be left behind. “The platform market will change – a result of the GFC and the upcoming regulation,” Delaney says. “We are now working with advisers who recognise these changes are coming to be able to offer them a solution that will drive their business successfully into the future. The next generation platform needs to help advisers look at the value of the advice they are offering rather than spending time on administration.”