It’s a time of massive change for the sector – what is going to happen in the next few years?
There’s no doubt that the seismic shift we’ll see is the number of planners dropping down by up to 40% over the next few years. The trend here is already going that way, and it’s very evident from the experience they’ve had in the UK that this is what will happen.
On the flip side, demand for advice is still increasing – the baby boomers are retiring and wealth transfers are increasing all the time, so the pressure on the advisers that are left is going up. So we’ve got this interesting situation where fees are being squeezed, compliance burdens are going up and there are fewer people to do the work – BUT, there’s opportunity there that is growing and growing.
That doesn’t sound like a basis for optimism…
It is though! I’m really excited about the next five years and what that will look like. For us it’s exactly the opposite of doom and gloom. Yes, each of our advisers will be looking after more like 250 clients than 150 but the technology is starting to be there to make that possible – it takes time, but it’s catching up now. We’ve taken our medicine as an industry, dealt with the new standards and the royal commission, and overall that’s been a really good thing for investors. We’re on the road to a better outcome for everyone.
You say technology is one of the keys – what’s your advice in finding the right tech to support these changes?
I was a stockbroker with Ord Minett for 17 years, so I knew what I wanted and what I was looking for. That turned out to be really important in that I was able to negotiate a good outcome for my business straight away. So that’s one tip, find someone who’s been around a while and get their advice.
The crucial outcomes for us have been around back-office efficiency and compliance efficiency. We’ve been working with the same provider for nine years – originally as Lonsec and now as FinClear. What’s been the standout for us over time, and what I’d tell anyone to look for in a provider, is that they’ve been prepared to listen to what I wanted, not just tell me what they wanted. In structuring Catapult, I was eyeing the future and trying to get ahead of the changes that we could see coming, future-proof against stuff like the royal commission. These guys have always been open to that view, understood what we were trying to do and been happy to work out a win/win to get everyone there together.
What kinds of changes are you making now to gear up for the next five years?
Clients really like transparency and are demanding more of that all the time. I like that what we have gives them the ability to clearly see day by day where their money is invested, trades done and dividends received in real-time. I also like that if someone doesn’t like the service it’s very easy to exit – they can just take off the MDA overlay and run the portfolio themselves. I’m a very big fan of things being easy and cheap to enter and exit. It’s taken a while, but the market is slowly coming around to this whole concept of trying to strip out layers of the cake. Where in the past businesses have been taking fees for all sorts of things along the way in the platform area, new products like a HIN-based MDA will put a lot of pressure on those fees. And I don’t think it diminishes the end game for the client at all, in fact it gives them what they wanted all along, just on a vastly more cost-effective basis.
FinClear is obviously all about the HIN-based stuff – what do you like about that?
The good thing about our association with FinClear is that we have the kind of relationship where we can sit down, have a coffee and talk about what we want to do for our clients. We’ve actually been talking with them about a HIN-based MDA for a couple of years now because we have a very big focus on transparency and we could see early on that basing our client offerings on HIN would be a key plank in the foundation of our future business. The HIN product as it stands provides that beneficial ownership and transparent investment reporting, plus it’s cost-effective and it slots in with our front end, trading and reporting right through to settlement. The fact that FinClear listened to us and our discussions came to fruition is great. We’re headed right where we want to go.