The Australian Securities Exchange’s (ASX) plans to list managed funds and structured products through its Aqua II rules poses no threat to platform providers with some preferring to see the move as opportunistic.
OneVue Limited chief executive Connie McKeage told InvestorDaily that the on-exchange movement has occurred in other countries, such as the United States, but has not happened in Australia because of vested interest.
“People say that [Aqua II is a threat] if they have an indefensible position,” McKeage said.
“As a platform provider we see this as a real opportunity.”
In response to the persistent rhetoric amongst the industry that there’s a fight back by platforms with the ASX and that Aqua II will diminish platforms and advice, McKeage said the market needs to grow collectively rather than fight each other around historical technology.
“The real opportunity is to get more money in one place from the consumer,” she said.
McKeage said just as financial advisers have had to justify their value it was inevitable that platforms would at some point have to do the same.
“Platforms actually have to justify their administration fees versus their reporting and consolidation fees,” she said.
“It’s a very healthy evolution in the market particularly since there are so many assets being kept off platforms because it’s not feasible to hold them on a platform where the consolidation fees are based on a percentage of funds under administration, which just isn’t justifiable.”
If the ASX is able to make the front end of managed funds more efficient than platform offerings, the cost of consolidation and reporting will need to be unbundled, she said.
“Right now in the traditional platform world, knowing what you’re paying and for what service is not clear,” McKeage said, adding that Aqua II will allow Australia to finally have a genuine supermarket of manufacturers where consumers have genuine choice.
BT Financial Group (BTFG) is currently assessing Aqua II’s opportunities.
“One of the things that Aqua II could possibly offer is greater efficiency in the industry around the processing of managed fund transactions, which is largely an inefficient process at the moment,” BTFG head of platform product Kelly Power said.
“Also, whether there’s an opportunity to leverage that technology and capability to create more efficiency for our business remains to be seen.”
Assuming Aqua II is a threat undermines the full value proposition of a platform, as it spans beyond just pure execution and trading, Power said.
“If you take the existing equities capability, there is still a huge amount of value in aggregation, reporting, tax, the way we support end clients and also the general planning tools that we provide to planners,” she said.
In addition, it was still unknown whether fund managers will offer their retail or wholesale options on the ASX but as an aggregator with scale BTFG should be able to access lower-end investment costs for clients, she said.
Macquarie Adviser Services head of platforms Justin Delaney said: “We see platforms as distinct in terms of the service and support they offer to advisers and their businesses, in areas like depth of service, comprehensive and consolidated reporting, custodial structure, superannuation and pension products and the breath of investment options provided through a platform.”
simpleWRAP director Krystyna Weston said Aqua II will be another way to allow for more diversified asset classes, as it was her understanding that platforms can list all Aqua II enabled funds.
“It will essentially put unitised funds in the same category as equity shares and cash and provide the ability to easily add and trade these assets, for example as part of a weighting in an investment model,” Weston said.
“This would mean using your broker for the settling and clearing of units rather than having to use product disclosure statements and application forms, which will potentially also add enormous efficiencies to adviser practices where their platform support assets are listed via Aqua II.”
From a technology and operation perspective, it should also make administration more straightforward, Weston said.
