Speaking at last week’s 13th annual Wraps, Platforms and Masterfunds Conference, BT’s head of platforms Kelly Power said vertical integration doesn’t necessarily have a detrimental impact on competition.
“As long as you’re acting in accordance with the best interests duty and as long as you’re not complacent, there will still be healthy competition,” she said. “You need to maintain relevance, or advisers will vote with their feet.”
It echoes the stance outlined by Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft, who recently told InvestorDaily ASIC was not concerned about vertical integration because best interests duty would be sufficient to ensure advice provided by integrated groups was not conflicted.
Colonial First State general manager of strategy Scott Durbin pointed out that "individuals have choices," adding that if a group is trying to distribute a sub-standard product through a distribution network, the network will respond and they will walk.
Scale within the industry is clearly driving costs down and functionality up – and “I don’t think you can form a view that it’s a bad thing", he added.
Macquarie Group head of platforms and insurance Justin Delaney said vertical integration is neither a positive or a negative, just a reality.
“Scale is important, but it’s as much about distribution as it is about platforms,” he said.
“If you end up with all the distribution owned by the platform then I think that could be a bad thing over time for the end consumer – but I think at the moment there is enough competition and enough opportunity.”
Ms Power said a focus on consolidation could help keep costs down, adding the good side of consolidation is efficiency for the industry and cost efficiency for clients.
Head of platform products at AMP Adrienne Cochrane said the consolidation issue is “top of mind” at AMP, but said you still need to watch what’s happening in the market.
“There are also challenges in that you are talking about peoples’ superannuation, so you need to make sure that if you’re consolidating, you’re doing it correctly,” Ms Cochrane added.
Commenting on whether platform consolidation could interfere with advisers’ new best interests duty, Mr Delaney said to an extent it depends on the platform.
“If you have guided architecture then this might create problems, but if you have open architecture and no restrictions then I think that’s fine. We see platforms as an enabler to transact on behalf of their client and act in their best interests,” he said.
Ms Power said it ties into the debate over whether platforms are a service or a product.
“If you’re just offering your manufactured product to your planners through your platform and with your insurance, then I think this will have big alarm bells for ASIC in terms of conflicts. But if you are offering open architecture and offering choice, then I think that’s fair,” she said.
In terms of the next phase for platforms, Ms Cochrane tipped further integration with other services, such as banking and self-managed super fund administration, and greater integration into the advice process.
