Wealth Management Value Chain
Today I linked in with a past colleague, boss, inspiration and guy to whom I at least once undelivered during my SAP days. This is for him, hopefully it’s a starting point for discussion.
Here’s my starting point for funds management (FM) in Australia. There are a few other excellent slides in the presentation. Three of the FM segments are ripe for disruption. Savy asset managers should be aiming to eliminate the middle man and increase their personal stickiness preferably with performance.
Smart consumers should be making this so for themselves right now. Eliminate the middlemen, find the individuals and companies that reliably deliver out performance or opt for an index fund. Index performance should cost less than 75bps and active funds managers should be around 150bps. Many of the good Australian ones want that and a 20% performance fee. People with over $100k in retirement savings should consider investigating a SMSF, those over $200k should have a good reason not to have one . Remember, manage your own money! That means remove a layer or two between you and your funds.
If you’re sitting inside the traditional superannuation industry you’re the target of big bank growth and paying 2-5% per year for almost guaranteed under-performance. Outside traditional superannuation lies access to the entire world of fund managers. Platinum and Hunter Hall would be my first two stops and I may change funds now with OC Funds to one of their funds. If all of my funds were going to be invested with one manager I’d put significant time in to investigating the individuals’ track records and integrity. As a general guideline, if you’ve never spoken to the person directly investing your funds then you’re not close enough.
Without talking to anyone in the business, I’m not well positioned to comment, but hey I’ll still advance an opinion. Business software solutions should be targeted at the distribution side. Enhancing the stickiness of existing distribution networks is their best chance at survival. Capturing the funds in a community too lazy to change providers has and should continue to work. Reduce costs by passing more data entry on to the consumer and automating the backend. Another reason to target the big players and why Ariba went after Fortune 500 companies is they’re the companies with the big bucks. A more entrepreneurial tack should be disruptive, perhaps looking to develop solutions to bridge the gap between asset managers and consumers. There’s a reasonably obvious and easy to implement solution to that and lots of tangential threads that could be woven in to make an attractive offering.
Disclosure: Long Hunter Hall International.
That’s off the top of my head without research. Big super may be gouging you more or less than indicated, but remember they’re probably only fessing up to the actual fees they’re charging you. The other costs are hidden in the many layers.
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