Enzumo - XPLAN Customisation + Solutions
The largest + most experienced independent XPLAN consulting group in Australia
0
Enzumo - Advice Technology Experts.jpg

Learn how technology can bring efficiencies

Find out what our financial adviser clients are doing, how they’re getting efficiencies from technology and how we find simple solutions for complex situations.

Advice software in 2020 - Part I

In my day job with Enzumo, we are increasingly asked for our views on the spate of new advice software solutions that have entered the market. Faced with greater choice, licensees and advisers will be challenged in making the correct long-term technology decisions.

As a starting point, it is best to define the problem itself through a few lenses.

Software Market

  • For over a decade, the Advice CRM market has been dominated by IRESS (XPLAN). Their scale and capability have left many smaller competitors by the wayside. The lack of significant competition has created tension between customer and software vendor for a whole host of reasons. When we don't have a real choice; no matter how good the product is, we always ask, 'Surely there must be something better?"

  • The challenge for all software providers has been getting the balance right between offering an 'out of the box' end to end solution versus allowing open architecture for customers to choose their own experience. It is much easier said than done.

  • The market size (adviser numbers) has been shrinking and is predicted to do so for the next 3-5 years. Only global players will likely have sufficient scale to operate profitability in Australia.

  • There has been considerable uncertainty on where Statements of Advice (SoA) requirements are headed — resulting in firms being reluctant to over-invest in systems which may not be future proof.

  • Correctly, software vendors have built their platforms to suit the needs of the large wealth advice business (including the banks). The exit of the institutions will require software vendors to rethink their distribution models and how they develop their products.

Licensees

  • The unbundling of product revenue from licensee fees has meant licensees are now required to pass through technology costs to their advisers in a very transparent way.

  • As advisers are now aware of these costs, they will be looking for greater value from these solutions. Something the licensee is often not resourced to do.

  • The mandating of software to improve compliance monitoring has created the challenge of a more restrictive business model, something independent licensees have professed they would not do.

  • Significant margin compression and increased costs have put pressure on licensees ability to attract and retain experienced technology staff. It has also inhibited the licensee's ability to spend significant capital on their own technology or bespoke solutions.

Advisers

Where do I start? Much has been spoken about the challenges facing advisers and firms. I remain optimistic. As the focus shifts from revenue production to profitability, real value creation for firms will be in scalable operating models enabled by robust and interconnected technology. The short-term challenges relating to this subject are as follows:

  • Many firms are sub-scale, lacking the internal change management resources for embracing technology.

  • Practice owners are facing some short-term revenue headwinds, which will reduce budgets for strategic technology spend.

  • Incumbent technology may be poorly adopted due to lack of time, capability or investment. This can often to lead to business owners seeking to make wholesale changes or a panacea for problems which can be easily solved.

Part II will look at what is the path forward for advice firms in reviewing technology, who are the players and trends to look out, and how these trends will affect the market participants.

Enzumo Team