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Protecting members' insured benefits - Column

Julia Newbould
— 1 minute read
Platforms, retail funds, master funds - whatever you call it - the future of the industry comes down to the value of advice and how it's communicated to consumers.
Platforms, retail funds, master funds - whatever you call it - the future of the industry comes down to the value of advice and how it's communicated to consumers.

Brillient managing director Graham Rich recently polled more than 100 industry participants, including a smattering of marketing managers, in an effort to find the most memorable television commercial in financial services this year. The responses were extremely interesting.

Although the industry funds' "Compare the Pair" commercial received the most votes, it was not mentioned by many of those polled. It seemed like a head in the sand response, or perhaps people really are blinkered into seeing what they choose.

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However, when these same people were asked what their best idea was for the platform industry to adopt immediately, they spoke of directly attacking the industry fund commercial, either through lampooning it and focusing on the value of advice, or just promoting advice.

Industry funds are a real threat to the role of advice in its current structure. Years ago, the retail funds did not see the platform threat, but inflows now show the platform market was a threat not dealt with early enough by retail funds. Similarly, the industry fund market continues to grow. Compare this to platform growth and superannuation choices.

Rich said: "If I take that proposition as being a valid basis of distinction - look at industry funds through a different set of eyes. They're attacking the whole provision of advice. Does that mean the way some industry funds are trying to offer advice is hypocritical? Are they scaremongering because they don't believe the delivery of advice is the most beneficial and cost-effective way of dispensing advice?

"They're cracking at the way that advisers use high-cost platforms in the current model."

The actual real cost to investors has not changed much with the introduction of platforms. However, the weakness in the current model is that no-one seems to have given a real value of advice model to the consumer that is easy to unders and and transparent in what the provision is for the fee charged.

Part of the reason is that there's no platform provider association. Platform providers instead have been forced to hitch their star to the advice providers. The platform industry has an absolute vested interest in the advice industry: Skandia, First Choice, Avanteos, BT Wrap and the rest need to get together and be the catalyst and protagonist of advisers who use platforms. Suggestions gathered in the polling included:

 . "Prove the value of advice, compare default fund net return to the average strategic asset allocation of the master funds plus calculate an average return to compare."

. "Demonstrate the value of asset allocation, tax efficient implementation and agreeing and working on goals." . "Stress the benefits of advice in wealth management - butcher (he is cheaper), doctor (he is more expensive) - who would you trust with your health."

 . "Need to unbundle the cost of advice. At the moment it's not really 'compare the pair', it's compar  the apple, orange, or pear. Alternatively, overlay the value of advice and the impact of that to the client."

Outside the square, there was the suggestion platforms need to appeal to the investor - a push strategy, or do-it-yourself option. "There is a strong disconnect between what platforms do and what they are perceived in doing and being."

Another thought was that the industry should be engaging the industry funds. But until someone is there to represent platforms and push the value of advice, it's not game over, but it is moving towards a showdown.

Fund managers make money whether investors choose a retail fund, industry fund or platform. They will still be managing the money. Thus, it is not the fund manager who should be promoting the value of advice - they have no vested interest in the matter - it is the platform provider and dealer groups that are collecting a fee from the platform that have an interest in the provision of advice. 

 

Protecting members' insured benefits - Column
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