Platforms have become a vital part of the financial advice space.
They have been battling it out to get the attention of advisers, mostly by undercutting each other through fees.
But, is low-cost over the long-term a feasible strategy?
And if platforms reach the point of no return, how will they then differentiate themselves?
Strategic decision
Michael Ohanessian, chief executive at Praemium, told International Adviser: “We’re going to get to the point where platforms are not just going to be another product that advisers choose.
“I think it’s actually quite a strategic decision. It’s become more and more strategic in terms of what advisers are looking for from their platform.
“Platforms really are, at the moment and will be for some time, arguably the most important thing that will deliver efficiencies and digital engagement with investors.”
Ohanessian said that average investors are paying between 1.5% and 3%, of which around 5-10bps goes to the platform.
“Obviously, I’m a bit conflicted in saying this, but platforms aren’t charging that much anymore, compared to the total cost investors pay to be invested.”
All about the tech
He added that platforms need to be “cost effective” for the adviser and the end investor.
On average, advisers can handle around 100 or 110 clients, he said.
“We can make platforms help advisers be more productive, as an example, so they can have 200 clients per adviser,” Ohanessian added.
“That’s going to have a bigger impact on the industry and chasing 5-10bps per platform is not the point at all.
“The point is to pick the right platform that’s going to help you, as an adviser, be more efficient; and therefore deliver value to your clients.
“The real efficiency gains come from the software itself, it’s about what the platform does.
“If you control your own technology, you can really innovate and add some value and efficiency, not only to your own business, but more important to the advisers.”
Digital signatures
One of Praemium’s most recent additions to its UK platform is its paperless and digital acceptance application.
This allows advice clients to sign documents instantly and electronically, which are time stamped and encrypted.
Advisers invite clients to accept the application form online, with progress tracked via a dashboard and email notifications.
“Efficiency” was a word that popped up again when Ohanessian spoke about the digital signatures.
“If you think about an adviser writing a business case for a client and wanting them to invest the money on a platform, for instance, that’s a lot of work for them,” he added.
“Going through the whole process and having someone receive an application in the mail and not actually signing it, not completing the deal or completing later than expected is quite expensive for a business.”
The Praemium chief also said the firm’s data found 60% of paper applications are funded after a month, while this increased to 80% for digital signatures.
“The productivity gain for advisers is massive because you’re getting a much better return on their investment,” Ohanessian said. “Arguably, it’s better for the investor as they get into the market sooner.”
Future tech introductions
IA also asked Ohanessian what is next for Praemium in the UK?
He said that the firm will soon launch its AI robot, which has already been unveiled on the firm’s Australian platform.
“Our robot has been analysing user behaviour in terms of how they interact with their investments through the app,” Ohanessian said.
“We’ve come to be able to estimate, with an accuracy of about 80% or more, which investors based on their interactions with their digital device are likely to be going through some sort of event.”
He gave examples such as redundancy, inheritance and a sudden financial loss.
“We have a number of advisers in Australia who, through our adviser portal, are looking at the robot every day to see if it sees anything.”
He added that it will be beneficial for advisers to take their relationship with their client to the next level.
“If an adviser is aware that someone is feeling a bit anxious, based on their activity, I think it gives them a reason to pick up the phone.
“It’s not waiting for the annual review, it is a real time reason for the adviser to call and say how are things going, which I think is really powerful.”
