As we approach the end of the year, it’s time to take stock of the major ‘flavours’ of 2011 and assess the industry’s position for the year to come.
Perhaps the biggest theme of the past year was global market uncertainty. From a fintech perspective, this created renewed interest in technology solutions to deliver heightened cost and operational efficiency.
As the industry braces for major regulatory change, with Stronger Super and FOFA in Australia and RDR in the UK, businesses are turning to next generation solutions to prepare for and take advantage of changes in regulation.
In the face of this major legislative change, it appears that the industry is now reaching a position of clarity over the requirements. We could ask if this is simply reform fatigue or if it’s about true reform readiness. Time will tell if the various regulatory initiatives – opt in, risk commissions, cost of disclosure, MySuper and SuperStream – will deliver what was intended.
As we move to a new year, there is still significant planning to be done in order to proactively take advantage of the opportunities offered from the impending changes. In Australia, the recently announced raising of the superannuation guarantee from nine to 12 per cent is set to strengthen the superannuation industry, but will require the investment of focussed planning in 2012 in readiness for a 2013 implementation.
Predictions for the year:
- In preparation for FOFA we will see a fight for access to High Net Worth (HNW) customers, with providers seeking to retain clients and dealer groups, as well as the adviser search for an increased share of the value chain by becoming platform providers.
- SMSF will continue to experience growth in line with an increasing number of individuals with the assets levels making it a feasible option. In a bid to adjust to this, platforms and retail fund managers will increase functionality to provide SMSF like additions to their platforms, as well as extension of asset coverage to the likes of IMA/UMA and ETF functionality.
- Platforms will also look to counter a loss of clients by supporting mass markets offerings. As advisers move to HNW on fee for service, platforms will need to implement online and scalable advice models.
- As the number of next generation platform projects increases, best of breed software solutions with strong integration will increasingly become a focus to support these changes in service, as well as growth for next the next decade and beyond.
- We have already seen an increase in merger and acquisition activity and this will continue in the year ahead as providers seek economies of scale. The big are getting bigger and we will see increased action around third party administration as the smaller players look to gain access to these economies of scale through outsourcing.
- The cloud is here and there will be increased thinking around BPO, hosting solutions and IT outsourcing.
The next year will largely be about rolling out changes to accommodate regulatory requirements and create profitable business environments through (perhaps in spite of) these changes.
Where do you see the wealth management industry heading next year?