Mr Wilson, whose company owns the financial planning software Coin, participated in a panel entitled ‘The Software Threat’ at the 14th annual Wraps, Platforms & Masterfunds Conference in the Hunter Valley on 11 September.
Asked to identify the biggest threat to the platform industry, Mr Wilson pointed out that the typical planner pays between 30 and 90 basis points for the ‘joy’ of having their assets administered by a platform.
“If they stuck that $100 million on [financial planning software] Xplan, they’re probably paying a flat fee of somewhere between $3,000 to $5,000 for the lot,” Mr Wilson said.
That stark difference in cost is the “reality of the threat” of a software provider competing with a wrap account, he said.
“Wrap accounts make their money out of margin; we [software providers] make our money out of licence fees,” Mr Wilson said.
However, he was quick to point out all of the functionality that a platform provides – namely tax, reporting, administration and execution services.
“None of those needs will go away and that’s why … it will constantly remain that the easiest and simplest thing to do will be to use a platform,” he said.
“But as you go out into larger areas of money where the financial planners are actually trying to maximise the margins to themselves … that’s where I think use of other IT alternatives will be the threat – and there’s definitely been a trend post-GFC in that space,” Mr Wilson said.
IRESS/Xplan senior business executive Michael Kinens, who joined Mr Wilson on the panel, argued that there would have to be a “cultural shift” in order for planners to abandon platforms.
Financial planners understand they can take an element of the margin and “pocket it” themselves if they take some administration in-house, Mr Kinens said.
“But do they want that headache?” he asked. “Even if you go to HNW-style businesses they still will sometimes take the obvious choice: ‘There is a platform over there, we’ll white-label it, we’ll use it in the same fashion that we might have used one of the big wraps’.
“It doesn’t come down to being a software threat – it’s a mindset change,” he said.
