Why pay for what you'll never use..?

1. MONEY MAY 2017 7574 MONEY MAY 2017
INVESTING PLATFORMS
Under the big
umbrellas
I
ntense competition by large financial insti-
tutions – typically the banks – that dominate
the investment platform market has been
a net positive for investors craving added
functionality and better service. Between
them, banks have invested big bucks updating clunky
legacy platforms that have struggled to handle tax and
reporting considerations in one place.
Giventhatinvestorsareattractedbybrandstheyknow
andtrust,it’shardlysurprisingbank-controlledplayers,
suchasCBA’sCFSFirstChoice,Westpac’sBTWrapand
Macquarie Wrap, have attracted a large flow of funds.
STORY
MARK STORY
Unsurprisingly, most of the funds going into
investment platforms remain adviser-directed. And,
as expected, when independent financial advisers use
platforms, they favour those independent of big banks.
The arrival of independent, tech-savvy newcomers
suchHub24,NetwealthandPowerwrap,unencumbered
by these legacy issues, has encouraged all players in
the platform space to continue adding bolt-on services.
KingLoongChoi,senioranalystatInvestmentTrends,
is witnessing greater synergies between banks and
the investment platforms they own and control as
they attempt to catch up. For example, in 2015 CFS
The little-
known tools
that do much
of the hard
work for
investors are
getting
smarter
‘Thenew
generation
pushthe
envelopeon
investment
optionsand
research
tools
PLATFORMS FOR INCREASING YOUR WEALTH
INVESTMENT
PLATFORM
FUNDS UNDER
MANAGEMENT
DIRECT ENTRY
WITHOUT
ADVISER
CAN INVEST IN
INTERNATIONAL
SHARES
CAN REPORT ON
THIRD-PARTY
INVESTMENTS
BROKERAGE
FEES, AUS
SHARES
ANNUITIES MOBILE
FRIENDLY/APP
IN SPECIE
TRANSFER
Asgard1
$34bn ✗ ✓2
✓ Min. $25 ✗ ✗ ✓
BT Wrap1
$70.4bn ✓ ✓2
✓ Min. $394
✗ ✗ ✓
CFS FirstChoice $79.1bn ✓ ✗ ✗ n/a ✓ mobile optimised ✗
CFS FirstWrap $9.6bn ✗ ✗ ✓ Min. $39 ✓ mobile optimised ✓
Hub24 $4.6bn ✗ ✓ ✗ 0.11% ✗ ✓ ✓
Macquarie Wrap $60bn ✗ ✓ ✓ yes ✗ ✓ ✓
Netwealth $11.4bn ✓ ✓ ✗ $20 ✗ ✓ ✓
OneVue $3.8bn ✓ ✓3
✓ Min. $22 ✗ ✓ ✓
Panorama1
$3.7bn ✓ ✓2
✓ Min. $12.50 ✗5
✓ ✓
Powerwrap $5.9bn ✗ ✓ ✓ Min. $19.80 ✗ ✓ ✓
1
These are BT platforms. All platforms offer consolidated reporting and account-based reporting, allow you to invest in managed funds and term deposits and offer choice of adviser. All except CFS First Choice allow you to
invest in Australian shares and ETFs. 2
Via managed funds. 3
Via managed accounts. 4
Trades placed via the portfolio service facility have a minimum charge of $19.95. 5
Coming in 2017.
FirstChoiceandFirstWrapwontheInvestmentTrends
new functionality award for allowing annuities onto
their platforms.
Efficient and frictionless
Beyond ubiquitous price considerations, what all plat-
forms now recognise is that planner efficiency and
“frictionless”engagementarethebattlegroundonwhich
new clients are won and lost, says Choi.
Nevertheless,thebiggerissueconfrontingplatforms,
according to Matt Heine, joint managing director of
Netwealth, is explaining to investors exactly what a
platform is. While there’s no single definition, they’re
first and foremost investment umbrellas that wrap up
sophisticatedtransacting,reportingandresearchtools
within a single client portal.
Once they understand this, the biggest questions
confronting investors, says Glen Killen, of financial
consultantAvalonfs,are“Whatcanandcan’tIdowithin
my own personal name within any given platform?”
and “How user-friendly is it?”.
He says greater functionality together with consol-
idated reporting are convincing investors/advisers
to favour platforms over self-managed super funds
(SMSFs). However, it’s not uncommon for financial
advisers to operate an investment platform for a client
in conjunction with an SMSF, typically when there’s
property involved, says Killen.
“It doesn’t do anything you couldn’t do yourself but
the beauty of an investment platform is its ability to
generate consolidated tax reports, which ensure you
don’t miss out on anything while saving you time,”
says Killen.
In addition to being independent, new platforms are
tryingtodifferentiatethemselvesfrombank-controlled
platformsbypushingtheenvelopeoninvestmentoptions
andresearchtools.Thatmeansgoingwellbeyondbasic
functionality,suchasinvestinginmanagedfunds,term
deposits and cash, and direct shares.
Akeypointofdifferentiation,saysKillen,isaplatform’s
ability to offer separately managed accounts (SMAs)
andincorporatethird-partyassets(off-platforminvest-
ments) that provide a complete picture of assets when
it comes to reporting. “Arguably attracting investors to
new entrants like Hub24 is their added functionality,”
says Killen. “To attract new business, newcomers tend
to allow in-specie transfers – both in and out – and
bank-owned platforms have followed suit.”
Another competitive advantage that new gens have
over the bank-controlled platforms, says Heine, is that
they’re typically not managing illiquid assets that can
only be bought or sold at certain intervals.
Innovation rules
With the fee structures becoming increasingly
indistinguishable between providers, Choi says it’s
“real” innovation that is now becoming a key point of
difference between platforms.
Unlike 2013-15, when most of their development
budgets were consumed by compliance costs, he says
2016 saw bank-controlled platforms turbocharge their
spendingondevelopingnewfunctionalityforplanners
and their clients. For example, after a lot of technology
issues, it’s understood Westpac’s BT Panorama spent
up to $1 billion upgrading its wealth management
technology platform.
With this sort of money being thrown at platforms,
Killen says that when it comes to comparing one or
more providers, the devil is increasingly in the detail.
For example, does a platform offer real-time and/or

2. 76 MONEY MAY 2017
While overall the OneVue
platform has recently
made big advances in function-
ality, Netwealth maintained its
top spot for having the richest
features in Investment Trends’
2016 platform benchmark and
competitive analysis report.
As well as receiving the award
for best client portal, Netwealth
ranked first for transactional
tools, decision support and
online business management
tools. Other notable enhance-
ments it made included: the
introduction of international
direct share trading, enhance-
ments to its managed accounts
offering, improved client and
business reporting and greater
client portal functionality.
Netwealth’s Matt Heine
attributes much of the current
$200 million in monthly inflows
to client interest in managed
accounts. “The beauty of a man-
aged account structure is clients
can have direct ownership with-
out the administrative burden of
managing that equity portfolio
themselves,” says Heine. “They
can also buy professionally man-
aged mandates and hold them
within their own account.”
Netwealth members have
access to Morningstar research
on managed funds; the ASX
live service; the ability to set
up alerts and watchlists; US
equity research from TipRanks,
which covers selected US equi-
ties including analyst ratings,
blogger sentiment and hedge
transactions; and monthly
investment strategy webinars.
After Netwealth, the next
four top platforms based on
Investment Trends’ survey are:
Hub24, Colonial First State
FirstWrap, Asgard eWrap and
Macquarie Wrap (including
Perpetual Private Wrap).
aggregated share trading (bundled with other trades
to ensure cheaper fees), what does the cash account
pay in interest, how are share purchases and dividend
reinvestment plans handled, and can you select your
ownadviserandstillhavetheirfeepaidbyfundsunder
investment within the platform?
That’s why Andrew Braun, who heads Netwealth’s
marketing operation, urges investors to assess the
degrees of online functionality. For example, exactly
howmanymanagedfundoptionscanyouinvestin, how
many term deposit options are available and can you
roll over and buy/sell online?
“It’s not whether you can invest in international
shares per se but how many exchanges you can invest
in, and not whether you can invest in the ASX but
whether you can invest in the entire ASX market that
matters,” says Braun.
Make the right choice
Killen maintains it’s impossible for investors to choose
therightinvestmentplatformuntilthey’vedecidedwhat
they want to invest in. For example, those who want
to invest in international shares will by default knock
out 75% of investment platforms from their universe.
Instead of trying to assess six or more platforms,
Killen recommends narrowing it down to three.
For starters, he says whether an investor chooses
a master trust over the other subset of investment
platforms, namely wraps, may depend on whether
they wish to invest in direct shares. While they have
virtually identical admin structures, only the latter
provides for this option.
He says investors will mistakenly go into a platform
and then decide what they’re going to invest in, rather
than the other way around.
As a case in point, while retail superannuation giant
AustralianSuper’s Member Direct platform provides a
good range of investment options, it may lack the ease
INVESTING PLATFORMS
MEET THE LEADERS OF THE PACK
ofuseandfunctionalityprovidedbysomeofthenewer
entrants. AustralianSuper also requires investors to
keep a specified minimum amount (20%) invested in
its other options whether they like it or not.
WhilepuristsmayarguethatneitherAustralianSuper
nor industry fund counterpart Media Super are tech-
nically investment platforms, they do provide levels of
investment functionality, albeit without a comparable
“wrap platform” product.
Whilemostplatformschargebetween0.5%and2%in
fees, based on tiered admin structures, Killen reminds
investors it’s a user-pays system. “So don’t search for
something you don’t need, like a Hub24, if a low-cost,
low-functionalternativedoeseverythingyouwant,”he
says. “Similarly, if you need access to a platform via an
adviser, why pay for one?” M