Platforms spending more on maintenance


By Julie May

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Platform operators have flagged that maintenance of dated systems is becoming increasingly costly and it is an issue requiring closer attention.

In its review of the implementation of “Regulatory Guide 148 Platforms that are Managed Investment Schemes”, ASIC reported that platforms wanted to use fewer administration systems and maintaining dated systems was misaligned with the price competition prevalent in the financial services industry.

A number of platform operators noted there was also an increasing trend to outsourcing administration functions to try to improve cost efficiencies, ASIC said in the report.

The regulator reviewed 14 platform operators as part of its review, but opinions regarding whether the findings reflected what was actually going on in the market were mixed.

CoreData and Investment Trends did not have any specific research indicating whether platforms were looking to outsource administration functions as a means to reducing costs, while a number of the independent platforms felt the findings were more applicable to bank platforms.

Hub24 chief executive Andrew Alcock said the findings were relevant to the bank-owned platforms as they were attached to so many systems and products that they were unable to move quickly.

“The newer platforms tend to have more modern technology. They’re not trying to chase their tails, nor do they have to spend money on updating and maintaining legacy systems,” Alcock said.

“ASIC is commenting on a real thing, but it’s not the newer players that are spending money on outdated technology.”

OneVue chief financial officer Brett Marsh said OneVue had not been looking at reducing administration systems, but it had been focusing more attention on integration.

“As competition forces businesses to innovate, I think you will see more groups look at outsourcing, but the main thing or challenge with outsourcing is that you don’t disrupt the client experience,” Marsh said.

Netwealth executive director Matt Heine said ASIC’s findings must be focused more on the bank-owned platforms than the boutique ones.

“No doubt larger platforms are sitting on old technology and the industry is looking to replace it,” Heine said.

“Because we came into the industry later, we can primarily do everything off one core system.”

He pointed to managed accounts functionality and said if the bank-owned platforms did not have strength in that area, it might be better for them to buy in or outsource.

A spokesperson for Colonial First State (CFS), which is tied to Commonwealth Bank of Australia, did not, however, report a trend to outsourcing.

“To date, we have found managing critical administrative functions end to end can provide productivity outcomes as well as ensuring we maintain market-leading levels of service and customer satisfaction,” the spokesperson said.

“We regularly review ways to streamline processes and systems to ensure we remain efficient and deliver the highest standard of customer service and value in the market.”

The spokesperson did not reveal CFS's platform costs.

Financialobserver  rang other banks with platforms, but their responses did not include whether they were or were not spending money on keeping their platforms up to date.

Further, ASIC said in its report that the platform industry had nearly doubled funds under administration (FUM) between September 2004 and June 2014, with total FUM up from $239 billion to $449 billion.

“The largest platforms have been getting larger relative to their competitors and the five largest platform providers now hold almost 80 per cent of primary planner relationships, creating competition issues for smaller players and emerging players in the market,” it said.

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