Investment advisers and industry super funds should “stick to their knitting” rather than expand into the investment platform market, an industry conference has heard.
The advice came from executives with platform companies: HUB24 (ASX: HUB), Netwealth (ASX: NWL), Commonwealth Bank of Australia (ASX: CBA), and Colonial First State.
They were speaking at the Morningstar Investment Conference about the drivers and sustainability of financial advice groups and industry funds investing in investment platforms.
HUB24 Managing Director Andrew Alcock said that although this was not new and driven by a desire to increase revenue or reduce costs, investing in platforms was expensive and difficult.
“None of us got here by not investing and it's very, very difficult to do on your own, even if you're using a third-party provider. I’m not sure it’s sustainable. Stick to your knitting,” Alcock told a panel discussion about the evolution of platforms.
“I think it's going back to the past. Do what you do well, and let's work together. That's my goal.
“I think you get a lowest-common denominator sort of platform functionality, if that’s where you head with some of the providers out there.”
He said the fact that some advisors did not want to be seen to be using the ‘house product’ was a “hand-brake” to this expansion.
Netwealth CEO Matt Heiner said low-cost platforms might make sense for basic managed accounts, but they did not offer the “value-add” provided for a similar price.
“It really comes down to the motivation of (entering the platform space), and it is important that you stick to your hitting in many cases,” Heiner said.
“So I'm not sure that mathematics or the equations work, but (it’s) certainly something we watch and will keep an eye on.”
Asked if industry funds offering direct investment options posed a threat to platforms, Colonial First State Chief Executive Officer Superannuation Kelly Power said the funds were not “playing in the same world”.
“Running a platform is much more than adding a few investment options,” she said.
Half the money flowing to platforms was outside superannuation, and they were dealing with wealthy investors with highly personalised, managed accounts, different tax structures and a broad range of portfolio types.
“They've (industry funds) got great capability. They've got really good returns. And that's something that's available to our platform investors. I really welcome it, but I can't really see an industry fund morphing into becoming an investment platform,” Power said.
