The current rise of managed accounts is comparable to the take-up of platforms in the late 1990s, says Hub24, but this time the banks are likely to sit on the sidelines.
Speaking at the IMAP InvestTech 2017 conference in Sydney, Hub24 director of strategic development Jason Entwistle predicted that managed account providers would not be acquired by the major banks.
Mr Entwistle was a founding member of the Navigator master trust in 1990 and the online wrap platform Avanteos in 2001, before both companies were sold to MLC and CBA, respectively.
The current managed accounts landscape is very similar to the platforms/master funds sector in the late 1990s, he said, before BT and Macquarie launched their wrap products.
“There are groups like us and Praemium that have been around for a while (probably about 10 years in some form) and the big guys are coming,” Mr Entwistle said.
But the question, Mr Entwistle said, is whether the “big guys” (specifically, the major banks) are going to acquire the smaller platform providers.
“There are really good reasons why that won’t happen this time. I was part of that revolution last time – I helped sell my business to CBA. So, I’ve been through that process,” Mr Entwistle said.
“The banks aren’t keen on wealth at the moment. They were really keen on wealth back then – not so keen today. They’re more likely to exit than enter the space.”
Another factor that differentiates the current platform landscape from the late 1990s is the start-up environment, Mr Entwistle said.
“The start-up environment [in the late ‘90s] was really, really hard. Getting funding and getting up and running 15 years ago was very difficult.
“Today, it’s a different environment. Start-ups are a natural part of our business culture now. We respect entrepreneurs, we give them capital and markets are open to them. And most of the players these days – guys like us and Netwealth – we’re listed.
“We’ve got access to capital. So, we don’t need the institutions for capital or distribution. We’re doing pretty well.”
Finally, the technology within managed accounts businesses is becoming much "deeper and more complex", which is likely to put the banks off, he said.
“When buying businesses like ours, institutions have never been that good at retaining the core IT of the tech teams. So, it presents a big risk. And the technology is so deep now that the risk is even greater.
“I think that the new look players like us probably have more in common with Facebook than we do with ANZ.
“We’re a pretty thin layer of financial services on top of a tech company. So, I’m not sure that the cultural fit is there.”
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