Technology investments in financial services providers are being asked to achieve two almost contradictory objectives due to reform pressures and market competition, a wealth management software company has said.
Bravura Solutions global head of product for wealth management Darren Stevens said “a dichotomy is occurring. Companies are looking to grow and they’re looking for efficiencies at the same time. There’s always a bit of both, but the two cycles are occurring at the same time at the moment.”
This is being driven by the Future of Financial Advice reforms in Australia and the Retail Distribution Review in the United Kingdom, which has to be in place by 1 January next year. The review is similar to the Australian changes with fee-for-service and bans on rebates.
“This has a number of impacts,” Stevens said.
“Providers are broadening their product suites, introducing [individually managed accounts, unified managed accounts, discretionary managed accounts, separately managed accounts and unified household managed accounts] for households.
“They’re enhancing their platforms to cater for high net worth individuals to offer real-time processing and real-time portfolio views.”
At the same time, platform providers need to retain and attract the mass market with simplified products and scalable advice.
So, the platform providers are doing two things. Typically, their new products are going onto new software, because their existing software platforms are inflexible and busy with SuperStream and MySuper legislative changes. New software is quick to deploy and providers are able to get their products to market more swiftly.
What are now called ‘heritage’ products are running on older systems, “so you have the situation where two different systems are running at the same time – the new products on a newly-installed system, and the heritage (legacy) products on older back-office systems”, Stevens said.
“Providers are looking to drive efficiencies within these systems and so often outsource their complex heritage back-office products,” he said.
So, for example, in the UK, BNY Mellon is outsourcing its IT for back-office registry to Bravura, from the hardware right through to the products and help desk.
“It’s a similar situation in Australia where some platforms are running between five to 25 heritage systems,” he said.
There is an increasing trend in third parties conducting the administration for platforms’ ‘white-label’ products. For example, in the UK, Citigroup’s administration business is partnering with Bravura software.
There is also increasing rationalisation of the industry through mergers and acquisitions, and rationalisation of products and systems inside providers.
“The key for platforms is to keep strong relationships with advisers. IT vendors need to have flexible solutions to efficiently take on the breadth of products,” Stevens said.
Self-managed superannuation fund (SMSF) offerings are also changing.
“Platforms are extending their offerings to look like SMSFs. They’re doing this through increasing usability and the control of the end-user, for example, AMP’s Super IQ,” Stevens said.
