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Movers and shakers

By Victoria Young
12 minute read

Financial planning software has never been so crucial or so hotly contested. Technological advances are rapidly changing the way advisers run their businesses. Consolidation in the market is creating waves. IFA brought stakeholders together to nut out the issues and trends shaping the industry's future.

IFA: The place to start would be to talk about the different value proposition of your products.

Ed Ho: Our strategy when we formulated and developed our business was that we didn't want to be just seen as a software company. Being more of a wealth management organisation, we want to see how we can package options in different ways, technology being one part of the equation.

Guy Thornycroft: We've got in with a slightly different slant coming into the market, clearly focused on the smaller adviser with a smaller client bank offering of a more lifestyle-based, fee-based service reliant on cash flows and point-of-sale interaction. That's our strength and point of difference. Prestwood started about 30 years ago and has been operating in Australia for around 11 years, so I guess that makes us one of the oldest.

Michael Kinens: Leveraging off what Ed has just said, from our perspective we see ourselves as being a specialist IT provider. That's largely all the business does, be it for the broking market, be it for the wealth management market. Interestingly we are in the area where consolidation is taking place. There'll be questions about consolidation, especially the pressure that advisers are seeing from what has typically been their space. It is having the most impact.

IFA: Have you experienced a talent squeeze or a skill shortage?

Michael Kinens: It's certainly the case. We have very specialist needs in terms of the staff we have on board that service the advisers. They need to be covering a huge range of skill sets from project management through to understanding technology through to having paraplanning skills. That's a very broad knowledge base to keep up-to-date and therefore it's not easy to find people.

Tony Graham: We're in a kind of similar space in being a software provider even more focused than the Iress guys. Universities don't churn out financial planning software employees so I think that especially at the boutique end, the best way to service an adviser is to sit down with them. And I think the challenge is to provide a breath of functionality that can help their business. For us, similar to Ed, I think the integration is the other key piece.

IFA: From the front and the back end?

Matthew Rowe: From an adviser's perspective, it all relates around work flow. We're still talking about a cottage industry. Platforms are suddenly seeing a revenue shift across to the adviser.

Alyson Clarke: There are some quite different business models and there are a number of people very strongly pushing for their own models. If we think that five or six years or eight years ago the wrap desktop was the front end that everyone was using and everyone was using the one platform. Everyone realised that one size does not fit all and there were pressures from a regulatory point of view as well.

Tony Graham: We are seeing greater transparency as to what the platform is doing and now with the introduction of straight through processing (STP), which will enable advisers that are using the Macquarie wrap to directly transact from their desktop software to Macquarie wrap. The interesting thing over time is what is happening in terms of those costs at that platform level.

Matthew Rowe: Ten years ago we hadn't even thought about getting a data feed from a platform or from a cash management trust or a share broker, it just wasn't done. Now I can see whether your business model is just one platform or three. It's going to be about getting the data from not only from the unitised value of the shares and the like, but also the insurance and risk side of things. We've raised this with a number of insurance companies and some of them are now starting to think about it; to get their heads around it. Maybe that is where some of this stuff is going to go. And there are a lot of legacy issues.

Matthew Rowe : The platforms have the power to push back through the distribution and squeeze back on the actual providers to reduce costs or actually sway the actual offering. Because of the distribution power that some of the platforms actually have, [it] allows them to squeeze prices more or the types of product offerings that the product makers provide. I suppose the question to you is how will this work from a financial planning software space?

Michael Kinens: Through the acquisition of Plantech, we are talking to a number of advisers in regards to [this]. It's a challenge in terms of their motivations on the platform's part - what they do and what they don't want to do. From an adviser's perspective though, they only want one thing and that is to increase efficiency. Therefore, as a provider what we have to do is look at that or we are out of the game.

Alyson Clarke: It also comes down to the back end and how well you can integrate insurance providers vis-a-vis the wealth management systems. They all kind of own the advice anyway.

Michael Kinens: The fact that the insurer still needs to work with paper, that's their choice, but we will make the adviser more efficient, and that's who we predominantly serve.

Matthew Rowe: Where advisers were coming from is that they wanted to create a statement of advice in a really easy way and not have to use a word processor and type it out themselves. That was the first thing we were looking to do. And then from there this has grown, which is great. IFA: Matthew and Ross, how are you finding the products are helping you communicate with the client?

Matthew Rowe: A moment of truth is how often you touch the client. Platforms sent out quarterly statements. High net worth clients want to be touched. They're dealing with Matthew Rowe, not Navigator. It literally takes two hours every month to get together around 250 client statements and email those out. The review process is now very straightforward. What used to take a day from very complicated clients now takes about two-and-a-half hours. In some cases they used to take three days and some of these guys who have been around when FSR [financial services reform] came out around understand that.

Ross Johnston: I think when talking about wraps and products, the financial planning software is the true wrap. And the way we've structured our business here is that the reporting that comes from a platform is providing our clients with statutory reporting. And financial planning software is crucial for that, generating reviews, handling all that kind of communication. I think many financial planners wished their platform didn't report to their clients at all and they certainly don't want clients going through the platform's website directly. You want them coming through to you, to the website badged with your business. That's where financial planning software providers can provide value.

Guy Thornycroft: A summary of what you're saying both of you [is] this is about how you get loyalty and how the software supports that.

Matthew Rowe: It's basing a business model based on your business. I may be on the phone to whoever, and they ring up and say 'what's happening with this?' and I can pull it up and say my manager spoke to the underwriter yesterday and this is where we're up to with it. That's a pretty powerful tool. It says 'you guys have got your act together', instead of your clients' [files] being in seven filing cabinets in the back. It's compliance done in a professional manner. The client trusts.

Guy Thornycroft: What about the face-to-face side of things? I'm getting most of my feedback in terms of how to get the client engaged in the process so they feel they own the process. If they want to throw in a twisted question you want to be able to do it on-the-fly without keeping reporting back to the black box.

Ross Johnston: You need something to be able to sit on the desktop. You need a system which you can take on the road or work out of an accountant's office to show the client they can get involved the strategy.

Guy Thornycroft: In the past we had black boxes that sorted out the information and spat out reports and it only took one question from the client and you'd have to go away and redo it. That's a huge development that's taken place over the last few years. The thing that has improved in the last few years is the ability to do things and illustrate things on the fly.

Alyson Clarke: I think it goes beyond that; it is about extending that transfer to clients. The client can view a financial plan at any time overseas online. They can actually go in and play with a plan and do 'what if' scenarios themselves. It may be a slightly simpler version but it lets the advisers determine what the client sees online and provide the flexibility depending on your practice.

Matthew Rowe: We do a lot of corporate super work and they can go through the website, they can put in their details and work out certain calculations. That is then looked at and followed up, giving it a personal touch. Personally, my high net worth clients, I don't want them doing that. I want them to come and see me.

IFA: How has the advice and technology process evolved?

Ed Ho: If you look at how technology has evolved and how the advice process has evolved 15, 20 years ago, we started off in the industry with having financial planning software very much being the sales tool, and you had product manufacturers doing the portfolio construction side of things. We've seen the evolution not only in the advice process but in the regulations - trying to be separate. And the key driver is, what is the advice process? We have [made] another step in the advice process in terms of advice and the administration of advice. The challenge and the good thing about the consolidation of the technology is that we've got those two worlds together. The biggest challenge we face is the legacy of the last 20 years and trying to get consistency and quality in the way the information is transferred. You talk about integration, you talk about two levels. Firstly, we've made progress in application perspectives; people talking to each other. But it's still an Achilles heel - it's only as strong as its weakest link. The second part that will continue to evolve is to get the transaction capabilities. We've been focusing on the last five years about consolidation of data reporting, which is really important from a client's point of view, but [next is] taking it to the next level and being able to transact efficiently with single data entry. And the third point that will move on from that is getting transparency in the work flow.

Tony Graham: I think it's the problem that those things will come together. The broking and the share trading market is very different from where a lot of planners are coming from, which is the managed fund-type processing. There are inefficiencies in that process. I think it's going to be a combination of those things that can be done real time and those that have potential lag times, which people need transparency where they are in the process.

Guy Thornycroft: Ed, you're looking at a couple of cross-disciplinary processes. The other one is which other advisers the adviser touches upon - his constant experience across accountants, estate planning - and that's an area that's client driven at the moment that I'm particularly interested in at the moment, getting the consistency in the software, estate planning as well as for the accountant. The client had the constant experience across all that, and the information doesn't have to get re-entered. The client doesn't like filling in fact forms at each of the different advisers either.

Michael Kinens: Being web based, we can do exactly that. An accountant can potentially log into the referral model and say here's a quant that I'm dealing with and here's some information about them and from that perspective the relationship can be maintained in a semi-automated way and acknowledging back to the accountant, who can know which stage the adviser is at the in advice process.

Tony Graham: We've seen a good evolution that technology has become a good enabler of different kinds of business models. And with the new technology, we can leverage off different business models' intelligence. The other flipside is that advisers like flexibility and advisers believe in many respects their whole business process is unique, but I think one thing the technology providers have been able to bring back to the advisers is the intelligence around how other people are doing things. What we're seeing is more consistency of what advisers appreciate is what's core and what's not core to the process and what they thought was unique is actually a standard process.

IFA: Are costs going up or down?

Michael Kinens: From an adviser perspective, we've been able to take the infrastructure costs. There's no hardware that they now literally have to go out and acquire. So it makes it very easy for a boutique group, who has two advisers or even less, as well as a business running 500 advisers.

Matthew Rowe: A number of years ago you were given the software if you had the platform. And that was the mindset. And you never thought about it.

Ross Johnston: In-house software was always provided.

Matthew Rowe: Whereas now, I'm happy to pay - Xplan has a reasonable overhead. It is a core part of running a business now so I'm happy to pay for it.

IFA: What are the headaches - have there been any disasters?

Matthew Rowe: Yes there has been. I've been gone through FPI, Pro-plan, Coin and now Xplan. The reason you move is because you go from being the person with the seven filing cabinets in the office to growing your business. I have to stress that platforms are not going to be driving the future of the industry. It's going to be the gentlemen sitting at this table that are going to drive the future of this industry.

Guy Thornycroft: We've had 200 products on our development list over the past 10 years. It's never gotten any shorter.

Michael Kinens: There's just this relentless drive on top of the regulations. You've got to update your software.

IFA: Are regulatory burdens strangling the industry?

Guy Thornycroft: Regulation was pushed onto advisers to try and force their hand to get their focus back on clients. The focus needed to be pushed back onto the clients - how do we achieve their needs as opposed to where was my next commission coming from and my next dollar. The heavy hands missed the mark well and truly I would suggest, because it's taken really good basic tools like the fact find, which was the best practice to get to know your client.