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The flight to ‘independence’ from major institutions by financial advisers has been a developing theme over recent years and it is set to continue. The findings of the Financial Services Royal Commission increase the importance of demonstrating greater independence between products and advice, but the reasons for the move are as varied as the types of clients and communities advisers serve.

Not just a product off a shelf

What are independent advisers looking for when partnering with technology and service providers? When I asked this question of our clients, the advisers, a strong theme in the responses was that they want to build trusted relationships and partnerships as opposed to buying a product off a shelf or a ‘user licence’. They want open architecture and an Approved Product List (APL) that does not restrict them from delivering what is in the best interest of their clients. They want compliance with a delivery mechanism that is flexible, allowing their own culture and brand in communications. Ultimately, they also need easy to use services and platforms that allow them to spend more time with clients without being bogged down in administration and compliance tasks.

Jayne Graving of Arch Financial Planning summarised the drive for independence as:

“I would say the benefits of being independent and what we value are the ability to partner with best of breed and like-minded firms with resources including research, technology providers, platforms etc. We have complete flexibility and are not locked into any system, methodology or product. Every layer of the advice process is independent of the others, and everyone retains the integrity of their service delivery. There are no impeding constraints like limited APL’s or conflicts, just teams of professionals working together by choice to achieve the best outcomes.”

What about the client perspective?

Some of the themes in the adviser feedback on what their clients are looking for, and hence what the adviser needs to deliver, include:

  • Transparency and confidence in the safety of the assets
  • Access to appropriate investment options at reasonable cost
  • Cost effective and demonstrative value of advice
  • Honesty and integrity in the way that services are priced, and fees are levied, with no hidden charges (such as in the form of no interest on cash)
  • Online portal for viewing portfolios and ease in communication paths for updates from the adviser.

Not only are these advisers looking for great services and products for themselves, the outcomes and the experience for their clients was paramount.

Features of the platform that assist the advice process

Advisers say they are looking for a provider to deliver these outcomes for their clients:

  • Remove the layers of fees built up over the years of institutional management
  • A cost-effective solution to assist with best interest duties
  • Support and automation of compliance through audit trails, controls, alerts and monitoring, as well as accuracy through reconciliations
  • Flexible and reliable reporting systems that can integrate into financial planning software
  • Open architecture giving the ability to choose from a landscape of financial products and services based on what is best suited to achieving the clients’ goals: “We don’t want to be beholden to one major, vertically-integrated financial company.”
  • Next-generation thinking: “Gone is the old ‘hidden fee’, ‘shelf space’ and ‘lock in’ approach.”
  • Branding by the adviser to keep the marketing and messaging consistent and assist in a retention of culture
  • Technologically advanced so that it reduces administrative staff time, lowering cost, reducing human error and increasing the efficiency of managing models. “Time spent on back office and administration is time that could be better spent working with our clients.”
  • Scalability to grow the business
  • A single solution that can be tailored for different types of clients, including retail, wholesale, families, individuals and not-for-profits

The efficiency of model portfolios and managed accounts

Operational efficiency and best interest responsibilities are also assisted by the use of model portfolios and managed accounts.

Firstly, advisers can easily change a model portfolio and it flows through to all clients’ portfolios with that model, and a bulk rebalance can occur smoothly and quickly.

Secondly, a good investment committee or investment manager can make a decision and make the change within a day, allowing them to be responsive to market conditions in best interest of clients’ returns and outcomes. Intraday ‘trading’ is no longer dependent on a stockbroker’s ability but execution is transferred into advice through segregated accounts with their own Holder Identification Numbers (HIN).

Liza Janakievski, CEO of Giles Wade, expresses what many advisers view as the emerging approach to the relationship between the technology (platform provider) and the adviser:

“As a firm with bespoke family group clients, we want to ensure that our future requirements for client tailoring are heard and not just put on a ‘wish list’.”

Even though technology plays a bigger role in the life of advisers and their clients, it does so in subtle ways. Interactions with technology are becoming more seamless within the advice process and systems are becoming easier to use. The goal at WealthO2 is to deliver elegant and intuitive software solutions for advisers that are efficient and compliant. Advisers want to spend more time with clients and develop relationships and let the software implement the adviser’s best interest advice in a scalable and efficient manner.

Now is the opportunity for advisers to cleanse the public perception of poor behaviour raised in the Royal Commission and deliver better outcomes that are clear of conflict and give the best results for both the client and the business alike.

Source: Cuffelinks – written by Shannon Bernasconi – Managing Director of WealthO2, a wealth management software solution provider for financial advisers. This article does not consider the financial circumstances of any individual.

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