What open platforms mean for the future of advice

John Kim shares his views on how tomorrow’s platforms will further evolve the role of financial advisers and portfolio management.

Since they entered the market more than 17 years ago, platforms have evolved considerably. Each iteration has driven change for financial advice practices. As we enter the realm of open platforms and open banking, what will the next generation of platforms mean for the role of the adviser?

In their earliest form, back in 2000, platforms were basically efficiency solutions aimed at removing the back-office burden for advisers. But this was just the start.

Next, wrap platforms changed the game, enabling advisers to scale their businesses by offering a low-touch online means of giving investors access to listed securities and managed funds across different product structures and tax reporting. Wrap platforms further improved administration and efficiency, reduced the cost to serve, and allowed advisers to grow their client base without eroding value.

On all sides, the client and adviser experience improved with the enhancements to digital portals via new technologies. Empowered by platforms, advice practices were able to decrease their administrative resources and, instead, focus on value adding services and propositions, such as research, strategy development, client management and more face-to-face time with their clients.

But advice practices didn’t just get more efficient, their very nature changed.

Until quite recently, many advisers were effectively running advice practices providing investment and retirement advice, researching and formulating investment portfolios. However, as platforms have evolved, so too has their investment and portfolio management capabilities.

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JOHN KIM
Head of Wealth Platforms Delivery
Macquarie Group

 

When your focus is on investments, trade execution and reporting, client conversations are kept very investment outcome driven: “How are our investments performing?”

As advisers and practices have moved to more goals-based advice models and utilising platform and portfolio efficiencies, such as model portfolios and managed accounts, their focus moved to more strategic, and ultimately more valuable conversations: “How are we tracking against your life goals?”

Full-service investment platforms

Today, the next technology iteration has created full-service platforms that are able to cater for clients and advisers more holistically.

These new core platforms, integrated with digital solutions, are able to provide portfolio management services across multiple business models and structures (custodial and non-custodial) and service offerings (trading, investment, super, pension and SMA overlays). They give advisers up-to-date, real-time information for themselves and their clients – and full visibility and control.

Importantly, from a service perspective, they also support straight-through-processing, smart automated workflows, financial planning software integration, as well as client engagement and communication tools. These digital platform solutions allow advisers to engage via preferred devices and channels – a critical capability for advisers gearing up to capture generational wealth transfer.

In practical terms, the new platforms mean a single adviser will be able to service a substantially larger number of clients, while actually continuing to improve service quality. And that service will be much more about financial wellbeing and much less about investment strategy, which will soon have the potential to be almost completely automated.

Platforms key to leveraging open banking

Following similar moves in the U.K. and Europe, Australia is in the process of developing policy to support an open banking regime. This will create a new financial services environment where consumers can take greater control of their financial data and, with consent, securely share this information with third parties to access new products, competitive offers and improved services.

Open banking will offer significant opportunities for personal finance management platforms that allow customers to take greater control of their personal financial data, enabling them to aggregate a full view of their financial position. This will also have clear benefits for advisers working with these customers to provide holistic wealth advice.  

Macquarie has already launched Australia’s first open banking platform using Application Programming Interface (API) technology to give customers greater control over how they choose to use their own financial data to securely access services from third party providers, such as budgeting apps, accounting software or their financial adviser.

Where next for platforms?

Strategically, we see platforms as essential to the way advisers do business; driving efficiency, enabling scale and adding expertise.

Portfolio management is, or will soon be, largely a commodity service. Platforms of the future will offer an integrated seamless experience to clients across the entire wealth value proposition: omni-channel, omni-device and be completely API-driven.

These open platforms will enable advisers to specialise in comprehensive wealth management and transfer issues, including: investment and retirement planning, executive compensation, complex trust and estate planning, and charitable giving. Clients will sit in the middle of a financial ecosystem, run on open digital platforms.

For those harnessing the right technology, this will allow for greater innovation and even better client experiences.

What does this mean for advisers?

This is good news for advisers who know their clients well and are prepared to get on board with new technologies and open platforms. Platforms will connect advisers with clients in new ways, positioning them to play a critical role in supporting financial wellbeing.

To get ready for this future, advisers should:

  1. Check – to participate in the new financial ecosystem, advisers need to make sure the platforms they are using are investing in the latest technologies. Choose open, API-based platforms that are working to harness technologies, such as artificial intelligence (AI), analytics and robotics.
  2. Consider – which platforms work with which customer segment. Baby boomers value trust. Gen X love convenience. Millennials expect an immersive, personalised digital experience. Tomorrow’s successful advisers will serve a far more technologically literate client base. This means they need to develop a multi-generational strategy for their clients’ adult children – or other young investors – to take advantage of this significant future wealth transfer opportunity. It’s time to make sure platforms are positioned to expand and grow with the very different needs of future clients.
  3. Envision – advisers are moving into a new role as a sounding board and life coach. This will be enabled by open platforms, which will soon give advisers greater access to real-time, holistic information about a client’s financial circumstances, enabling more powerful and timely conversations supported by AI-generated insights. Advisers need to consider their new value proposition and adapt their go-to-market strategies accordingly.

John Kim is Head of Wealth Platforms and Delivery at Macquarie Wealth Management.

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