Platform funds under advice (FUA) are expected to drop by $22 billion over the next three years, as more advisers who target high net worth clients move their businesses elsewhere, according to Tria Investment Partners.
In a Trialogue note to clients, funds management consulting firm Tria Investment Partners reflected on the study results from the inaugural Tria Australian Wealth Insights Programme, which found that the segment of advisers targeting affluent customers expects to reduce their FUA on platforms by nearly 10 per cent by 2018.
The segment of advisers targeting high-net-worth clients expects to reduce theirs by nearly 5.0 per cent while mass affluent advisers predict they will pull 2.6 per cent of their FUA out of platforms by 2018.
While platform usage is not expected to disappear entirely, the predicted reductions could have an impact on assets and revenues, the article states.
“Let’s be clear: platform usage is and will remain strong across all advice segments. However, the projected reductions have meaningful implications in terms of assets and revenues.
“If advisers behave in the way they expect, the shift in the affluent segment alone will create a $10 billion hole in platform FUA by 2018. When we take into account the other segments as well this rises to a $22 billion gap from the current position,” according to the article.
The study also found that the affluent-focused advisers are increasingly moving their businesses to direct holdings and ETFs off-platform, even if it means fragmenting client portfolios. Advisers are also continuing to make “full use” of their desktop software applications, including investment portfolio consolidations, and for some removing the need for traditional platforms.
Further, industry funds are increasingly being used for smaller or simpler client segments and advisers who are growing their SMSF businesses have a lower propensity to use platforms, the note said.
While platform providers are facing declining growth and intense competition, Tria believes they should seek to differentiate from each other as way to remain relevant.
“Platform operators will need to consider their next strategic move carefully before deciding to remain with the crowd, move premises to the high street or open a haute couture boutique,” the article said.
“But the opportunity to be a first mover might not be available for long.”
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