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The future of platforms

The future of platforms. Presentation to Capstone Conference 2010 Nick Blue: Business Development Manager. The history of platforms A timeline of the platform industry. The current funds under advice (FUA) and flows analysis. The current trends and issues

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The future of platforms

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  1. The future of platforms Presentation to Capstone Conference 2010 Nick Blue: Business Development Manager

  2. The history of platforms A timeline of the platform industry. The current funds under advice (FUA) and flows analysis. The current trends and issues What will legislative change mean? The future of wraps What will the market look like? What will platforms focus on? What will this mean to Advisers? Today’s agenda

  3. The history of the platform market Uptake share of net inflows Next generation platforms launched First non discretionary Mastertrusts Baby platforms launched Super Wraps Launched First discretionary Mastertrusts Wraps Launched Early 1990’s Mid 1990’s 2010 Oct 1997 Early 2000’s

  4. The history of the platform market March 2010 Market inflows Market outflows Market net flows $ millions Source: Plan for Life, QDS Admin, All Master Funds (competitors manually selected) – March 2010. 4

  5. The history of the platform market Wrap market FUA BT Wrap % share of FUA Source: Plan for Life, QDS Admin, All Master Funds (competitors manually selected) – March 2010. 5 5

  6. The history of the platform market Source: Plan for Life, QDS Admin, All Master Funds (competitors manually selected) – March 2010. 6 6

  7. Current Issues/Trends - Legislative change Impact on Initiative Description • Prospective banning of commissions and any form of payment relating to volume or sales targets • Percentage based fees can only be charged on un-geared products Payments Remove conflicted remuneration structures • Retail clients to annually renew (by opting in) to an adviser’s continued services Product neutral adviser charging regime Adviser duties and standards Statutory fiduciary duty for advisers • Advisers to act in best interest of their clients, ahead of their own when providing advice • Removal of accountant’s exemption to allow advice on SMSFs • Review of professional standards Other Advice and investor scope • Expand provision of low cost simple advice • Distinction between sophisticated/unsophisticated investor to determine relevant financial service provider obligations Source: ‘The future of financial advice’ information pack, Hon Chris Bowen MP 26/4/2010

  8. A move away from managed funds • A move to Exchange Traded Funds • A move to Dimensional Funds Management • Re-ignited emphasis placed on cash and term deposit solutions Trends and Issues in the platform market Cost of platforms Investment Choice • They now make up 30.9% of all super assets $369b • There are 417,000 funds with 30,000 new funds being established each year • Only 50% of them are being advised on • SMSF assets have grown at 20% pa for the 10 years • The fee for service debate continues • Building a CVP for 2012 • Expected change in structure of fee • Fee differential between SMSF and other investments How Advisers charge Growth in SMSF’s Trends/Issues in the current platform market • Total cost to client • Aggregation of fees • Margin to dealer group • 70% of advisers believe cost of managing equities on wrap is too expensive

  9. Trend/Issue – Change in investment choices Source: Investment Trends “Planner and Direct equities Report – June 2010” 9

  10. Trend/Issue – growth in SMSF market Source: Investor Trends SMSF Investor Report – May 2009

  11. Trend/Issue – How Advisers charge Source : Investor Trends – Planner Business Model Report September 2009 11

  12. Trend/Issue – How Advisers charge C-Wrap Statistics Total BT Wrap Statistics Source : BT Wrap – May 2010 12

  13. The future of platforms Issue Item Description #1 Regulatory change • Outcome of the reviews may be that scale rewards are banned. • Outcome of review may mean that margin made from badges may not be possible. #2 Competitor intensity • Competition will ↓Price, ↑ service and functionality. • It will also see continued entrants from new sophisticated providers. • Planner software diversifying their offering. #3 Focus on SMSF market • Platforms will look to capitalise on this growth segment and look to position to move more SMSF’ on platforms. • Platforms will continue to integrate with third parties involved in SMSF’s #4 Equities • Platforms will develop more sophisticated equity solutions to capture this growing market. #5 Retirement opportunity • Platforms will look to develop products to meet the needs of an aging population. • Platforms will look to capture more accumulators. #6 Integration • With accountants and their software. • With planning and risk software. • With stockbrokers (SMA’s) #7 Mass affluent segment • The mass affluent segment is large and attractive but platforms yet to target segment. #8 • Maintain client as key relationship but allow client access. Self Service 13

  14. Administrative efficiencies • Opportunity to maintain revenue • Do you have a strong value proposition for equities ? • More than 50% of SMSF are unadvised • Further improve your CVP • Ability to re-engage or improve referral relationships Opportunity for advisers What will platforms focus on - SMSF • 32% of SMSF are held in direct equities (30 June 2009) • Share allocation in portfolios expected to double of the next 5 years • More SMSF will move to drawdown phase • SMSF clients demand more sophisticated reporting • 31% of SMSF Trustees said they would pay 2.5% for consolidated reporting • SMA integration with brokers • Model portfolios with brokers • Linkage of wrap to accountants • Client access Intergration Equities Cash and Term Deposits Reporting • 26% of SMSF are held in Cash or Term Deposits (30 June 2009) Logic • Scoping consolidated reporting • Will provide tax parcelling from 1 July 2011 • Delivered Cash notations in March 2010 • Will deliver improved functionality in 2011 • Implementing a CMA in 2011 • Improved Term Deposit Maturity process – August 2010 • BGL data downloads • Scoping SMA’s • Improving tax statements • Commenced a 3 year transformation program in 2009 • Delivered bulk trading, contra trading, improved corporate actions market information • Delivering model portfolios in September 2010 • Scoping SMA capability in 2011 What is BT doing

  15. Key messages of today • The platform industry is highly competitive, dominated by banks and moving through a period of rapid development. • The biggest issue in the platform industry is what will legislative change mean. This will have impact on the price of platforms, the investments adviser choose and how advisers charge their clients. • Wraps will focus on growth areas of SMSF, equities and retirement products going forward. 15

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