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Is there an Uber or Amazon of wealth management?

“Even well-meaning gatekeepers slow innovation. When a platform is self-service, even the improbable ideas can get tried, because there’s no expert gatekeeper ready to say ‘that will never work!’ And guess what – many of those improbable ideas do work, and society is the beneficiary of that diversity. I see the elimination of gatekeepers everywhere.”

Jeff Bezos, quoted in The Everything Store: Jeff Bezos and the Age of Amazon, page 315.

“Spend the vast majority of your time thinking about product and platform. Many large, successful companies started with the following:

  • They solved a problem in a novel way.
  • They used that solution to grow and spread quickly.
  • That success was based largely on their product.

In the Internet Century, all companies have the opportunity to apply technology to solve big problems in new ways … if you focus on your competition, you will never deliver anything truly innovative.”

Eric Schmidt, CEO of Google from 2001 to 2011, quoted in How Google Works, pages 91-93.


I recently read 'The Everything Store', 'How Google Works', and Walter Isaacson's biography of Steve Jobs and Apple. The creation of these three extraordinary companies in a short time from the vision of a few individuals left a nagging question in my mind at almost every page: can any company do to the Australian wealth management industry what Amazon did to Borders, what Apple did to Nokia, what Google did to all other search businesses? They are all remarkable stories of redefining how business is done, breaking the traditional rules and in the process, destroying much of their competition.

Markets where anything seems possible

It’s the same with Uber, the ride-sharing service with operations in 53 countries and a market value of about US$40 billion. There are 5,500 taxi licences in Sydney worth about $400,000 each or $2.2 billion. In Melbourne, metro licences have fallen in value from $515,000 a few years ago to $290,000 on a combination of new licences and Uber drivers given access to the market. Uber has fought legal battles all over the world, as it is in NSW, but there’s no denying the public demand.

It’s a good example of a change in the way the global economy operates. It’s a platform business that matches customers with drivers, turning employees into ‘entrepreneurs’, in a similar way to the thousands of businesses run from home using ebay as a distribution platform. And there are ‘ubers’ for all types of services such as cleaning and massage, and of course human resources with sites like Freelancer and Elance.

Amazon is portrayed in the book as a brutal competitor. When (owned by a company called Quidsi) was gaining market share among mothers but refusing a takeover offer, Amazon reduced the price of diapers by 30%, and then launched a new service called Amazon Mom, with additional discounts. Quidsi executives estimated that Amazon lost $100 million in three months on diapers. Then Wal-Mart made a bid for Quidsi, and Amazon threatened to drive prices to zero if Wal-Mart won the bidding. The founders sold to Amazon out of fear.

“The money-losing Amazon Mom program was obviously introduced to dead-end and force a sale, and if anyone had any doubts about that, those doubts were quickly dispelled with by Amazon’s subsequent actions. A month after it announced the acquisition of Quidsi, Amazon closed the program to new members.” The Everything Store, page 299.

Of course, the Federal Trade Commission investigated the deal but gave its approval. If Amazon and Uber can take such actions in the face of legal hostility, anything seems possible in the age of the internet.

Australia has its home-grown examples of severe market disruption, the most public being the turmoil created for newspapers from the success of, and, almost bringing the once mighty Fairfax to its knees.

Unlike Facebook and Twitter which have invented new ‘social media’ activities, companies like Uber and Amazon are killing off competitors. When Jeff Bezos convinced publishers to allow him to put their books on the Kindle, they thought he would charge a margin over the usual wholesale price of books of around $16. But by retailing books online for $9.99, Amazon reinvented the price point. It did not take long for booksellers like Borders and Angus & Robertson to go out of business. Despite the fact that Amazon made a loss in 2014, the market has spoken: its market cap is about USD170 billion.

The defining characteristic of these great American companies moving into retailing, mobile communications, social media, search, taxis, employing contractors and booking B&Bs is that they break the mould for the way business is done. New methods are often not appreciated by the incumbents until it is too late, and it is fanciful to predict what future disruptions will occur. When Mark Zuckerberg developed Facebook, he did not have a notion that it would become the way a billion people shared their most intimate secrets, and he certainly he had no idea how to make money from it.

What is major disruption in Australian wealth management?

By disruption, I don’t mean somebody developing an online ‘robo-advice’ model (such as GuidedChoice, eMoney, Betterment and Wealthfront in the US or Stockspot and BigFuture in Australia) and collecting $1 billion in funds in a few years, although that would be considered a great success and will happen. With $2 trillion in superannuation, real disruption is at least $100 billion within a few years, which is only 5% of the market. Such numbers would worry the four major Australian banks, which are not only almost 30% of the market capitalisation of the ASX200, but wealth management is significant to them all. They also control the majority of financial advisers in Australia.

Where can disruption happen in the value chain?

Wealth management is usually broken into at least three parts:

  • financial advice
  • administration platforms
  • asset management

Let’s consider what happens if an investor uses a platform such as Colonial First State’s (CFS) FirstChoice Wholesale, the most popular among financial advisers. It requires a minimum of only $5,000 so it is a retail product. On a typical and popular fund such as the Schroder Australian Equity Fund, CFS charges a fee of 1.02%, and splits it with Schroder. Call it 0.5% for CFS administration and 0.5% for Schroder asset management. CFS also has an Australian share index option for only 0.40%, where the asset management costs only a couple of basis points (0.02%). So we can generalise that major platform administration costs about 0.4%-0.5% with asset management on top of that. Financial advice costs are additional: it may be fee for service, say $350 an hour, or a percentage of funds, say 0.5%.

In simple terms, there’s the Australian wealth management value chain. If a market disruptor comes in, they can easily remove the asset management cost by using index funds; they can automate advice based on an internet-based, self-service model; and investments can sit on a simple and inexpensive administration platform. Would it be the equivalent of Amazon charging $9.99 for a book that previously retailed for $30, and destroying other booksellers?

I’m not looking here for the disruption of SMSFs holding $600 billion or one-third of all super. They are serviced by thousands of advisers, accountants and administrators as well as being users of the products of major banks, fund managers and the ASX. My focus here is on a single company coming in with a game-changing, disruptive product offering.

What will the disruptor do or look like?

1. It will not attack one part of the value chain, it will be end-to-end with a complete investment solution. For example, it will not be sufficient to only offer ‘great asset management’, as plenty of companies claim that. A disruptor could hardly ‘out-Vanguard’ Vanguard (or State Street or BetaShares) and provide cheaper and better asset management through ETFs. Broad-based domestic or global equity portfolios can already have negligible costs, less than 0.1%. These ETF providers are successful, well-capitalised companies with overseas parents or partners who already have the capacity to take large shares of the Australian market. Although their growth has been impressive, they only have $15 billion, less than 10% of the money managed by CFS.

2. It will be price-led. I cannot see how anyone can convince enough people that a superior product is worth paying up for because that will depend on a promise (guarantee) of outperformance over time. Amazon can set up systems to deliver a book next day and Telstra can have the best phone coverage in Australia but nobody can promise to outperform the market consistently, whatever their resources. This 'game-changer' will be index-based or with some type of 'beta' engine, not a bunch of superb stock pickers making company visits all day. They are too expensive.

Similarly, the portfolio will not include alternatives or unlisted investments, as they have higher fees and are more expensive to manage, even if done internally. The portfolio is likely to be dominated by cash and term deposits where the ‘fees’ can be hidden in the product margin.

(Of course, Apple's success is far from price-led, its phones are the most expensive on the market. They have achieved this through beauty of design and creating massive desirability and arguably the best product. But in my wildest dreams I cannot see people queuing up around the corner to invest in a managed fund based on its beauty and desirability).

3. It will need to be well-capitalised and carry a great deal of market trust. This is not like buying a book with a secure credit card charging system. People will be handing over their future, their life savings, and the company must be beyond reproach. Whatever they do, they will need to buy time and spend a lot of money on marketing and disrupting and delivering results, plus ongoing R&D specifically for the Australian market.

4. It will be technology-based and self-service. Investors will input their own characteristics into an engine and it will recommend a portfolio of investments, selected according to the risk appetite and demographics of the client. This ‘robo-advice’ (a large part of 'fintech') is already being embraced by major players in the US, such as Charles Schwab and Fidelity’s acquisition of eMoney.

5. It must break established distribution networks. An estimated 70% of financial advisers are already ‘tied’ to the four major banks, AMP and IOOF. At the moment, eight out of every ten people default to the super fund selected by their employer and $10 billion a year automatically flows into default super funds. Whereas everyone selects their own phone, most people do not engage with their superannuation.

A new winner would need to capture the hearts and minds of investors in the way no financial product has done before. The only alternative to making the product ‘sexy’ is ‘fear’, but how would that gain traction? As David Blanchett, Morningstar Head of Retirement Research, said:

"We all know most people aren't on track for retirement. I think surveys that talk about poor savings in the US, or the fact that people haven't saved enough for retirement, are relatively worthless. Kind of like saying, 'The sky is blue'". (Yahoo! Finance, 8 February 2015)

Severe disruption is unlikely

The growth of superannuation assets in Australia is assured by the Superannuation Guarantee regime, making it a highly desirable industry to be in. It must attract new competitors. There’s no denying wealth management will change significantly over the next ten years, just like every industry driven by technology. There will be surprises, developments nobody has yet thought of, perhaps from a couple of young computer geeks in the proverbial garage. Some will do well and drag in a few billion. But that’s not disruption like the executives of Kodak, Blockbuster, Nokia and Borders experienced.

Based on the short and glorious histories of Amazon, Google and Apple and their impact on established businesses, how can anyone conclude that wealth management will not face a similar massive overhaul from a new competitor? Yet that’s my conclusion: I don’t see how any company can make wealth management sufficiently exciting for enough people to grow a market share of 5 to 10% in the next few years. To use Google’s test, what problem will the disruptor solve in such a novel way that hundreds of billions will divert from incumbents? I hope I’m wrong because it would be fun to watch.


Graham Hand has worked in banking and wealth management for 35 years and is Managing Editor of Cuffelinks.


Warren Bird
January 17, 2019

Sad to hear of the passing of one of the great "disruptors" of the asset management part of the value chain, John (Jack) Bogle, founder of Vanguard. Aged 89.

Few people in the investment industry change the game the way he did. A true innovator.

The passive vs active debate will always rage on, but at least he created the means for passive to be done the way it ought to be - delivering what it says it will at a very acceptable fee rate. (All managers should aspire to do that - it's a recipe for success.)

Bogle remained a great figure in the industry because it was not about him being a guru, a great stock picker or whatever - it was about an approach that he championed that is reputable and replicable. The stars of others in the industry have shone for a while, until they got the next call badly wrong and thus the reality dawned that the great call they made on the market was mostly luck dressed up as 'analysis'. Bogle's approach, by contrast, was humble and provided a genuine service to the market that has stood the test of a very long time.

Vale Jack Bogle.

Graham Hand
January 17, 2019

Well said, Warren. Sad to read that Jack Bogle died yesterday. Few people can claim such an amazing legacy, changing the way millions of people invest and pushing down costs. His life should be celebrated.

Peter Worn
January 09, 2019

Four years on and still little evidence of progress or a sustainable disruptive business model. Perhaps the innovators have been focused on solving a problem that doesn't exist, or the wrong part of the problem.

October 16, 2015

Recently came across this. It is probably the best piece I ever read on innovation in wealth management.

Craig Racine
May 12, 2015

A very enjoyable article and structure to provide a solution.

One of the major issues has been highlighted recently by Glenn Stevens, and in the Murray Report, is the search for capital stable retirement income in a world of historical low 'risk free' rates.

Mr Stevens indicates that retirees would be forced to make more risks than in the past.

Are other solutions available? Can advances in technology and deregulation provide the impetus for financial innovation to offer what those investing in conservative assets want – to generate a predictable income without the volatility and without the constant fear of losing their capital? I believe it can.

The public policy requirements for a solution are:
- A straight-forward business model with minimal capital at risk at all times
- Financially strong counter-party such as the ASX for hedging activities
- Exchange traded for transparency of mark to market valuations
- Robust in all market conditions
- Flexibility of the investment manager to use business judgment rather than “black box” trading

One alternative is to buy and hold ‘blue chip’ high yielding stock and generate income from the dividends and franking credits. The ASX listed stock and index options can then be used to protect capital at least cost by managing option positions continuously.

The theoretical knowledge to protect a portfolio dates back to Fisher Black and Myron Scholes publishing their 1973 paper, “The Pricing of Options and Corporation Liabilities”) the basis of work for which Black and Merton received the 1997 Nobel Prize for Economics.) Since then, it has been known that it is possible to protect share capital. The issue has always been the cost of that protection.

Advances in technology have enabled the sophisticated systems to compare live ASX pricing of options and construct a risk-return profile that always has downside protection in place and participates in the upside, whilst deregulation of the industry has seen substantial reductions in fees to implement the strategy.

The investment manager would continue to make a business judgment on market outlook and protects capital from price decreases to predetermined limits, and participates to varying degrees in stock price increases, rather than a 'black box' solution.

It is time to broaden the debate to consider if financial innovation can produce a solution rather than investors moving out on the risk curve and become more fragile to adverse market conditions.

This would meet the framework that Graham has set out of applying technology to solve big problems (the cost of protection) in an end to end solution for investors seeking peace of mind.

Ben Smythe
April 09, 2015

Thanks for the thought provoking article Graham.

I have always been of the believe that the further you are "away" from the client (no matter what the business), the more fee pressure you will be under. When looking at your 3 components and Australia's financial services sector, you would then conclude that the funds management and administration piece would be most under threat of disruption. However, given that the banks + AMP & IOOF control give or take 80% of the whole food chain, they have been able to manage this quite nicely and effectively "give away" the advice piece in order to protect their sizeable funds management/admin platform margins.

While this tight arrangement continues I think it will be difficult for someone to make a significant difference to this space. Importantly though their "sandpit" is only 20% of the marketplace, and the 80% is most definitely up for grabs.

In my experience the next generation clients coming through (who will also inherit a lot of $$ from the baby boomers) will not be buying from the current model. They see through the conflicted advice, over priced platforms, and cookie-cutter approach. To that end, I believe there is a major opportunity for a reputable player to offer a technology focussed, well priced service with optional contact with some quality independent advice. This could capture a big part of the 80%!

Carlita Buchanan
March 18, 2015

My opinion is the new entrant should not compete with the existing players rather show the market why it should look at them in the first place - what is the point of difference? Robo advisor is an online wealth management service that provides automated algorithm based portfolio management advise WITHOUT the use of HUMAN financial planners. It's ears are pricked and guaranteed busy tweaking it's functionalities and as mentioned will head this way - when there's money to be made those who will benefit the most will FOCUS. Investors and particularly the SMSF trustees should take caution as I would imagine there will be no recourse for mistakes.

Graham Hand
March 13, 2015

Hi Anthony

Thanks for the follow up. With 61 comments at last count, lots of LinkedIn chat and new developments every week, this is not an easy subject to put your arms around in a thousand words. Part 2 has not been published but aiming for the next two weeks.

Cheers, Graham

March 13, 2015

With Graham Hand's article on the March 5 2015 issue there was a comment about a 2nd part to this article. Has this second part been published yet? Thanks for your help...Anthony

Gordon Scott
March 12, 2015

Iress just snagged CBA wealth, who says the old dinosaurs are out the picture?

Darren Heathcote
March 11, 2015

Great article Graham,

I do believe there is a place for rob-advice to take a large part of the Australian Market, but where I perhaps differ from you is I do not see the immediate path as going from B2C.

Its all about the economics. Its about Costs, Time and Scale.

As you quite rightly point out trust is a major issue. Hence B2C will be just too slow and cost of customer acquisition will be too high. I dont think any investor in their right mind would be prepared to back this approach in Australia and expect to get a return on their investment in a reasonably comparative time frame

However, clearly there is a need for it and it can and most likely will come in time, especially given the "Älways On" generation but for now the route is almost certainly B2B, and I will explain.

In my view its not a matter of trying to quickly disrupt the incumbents with a platform that immediately wins the hearts and mind, and very importantly trust of the individuals.
Its about working B2B with the incumbents, leveraging off their reputation (whatever that might be worth) and distribution networks to help them realise the benefits.

What I'm suggesting is any fully automated platform that can cater to providing independent personalised robo investment advice (with a fully automated SOA), based on taking into account a clients big picture (irrespective of where assets are held), managing these investments whilst reducing fees and tax in the process will allow them to build scale and one would hope, reputation.

In other words what is now becoming a commoditised service and currently taking an average adviser several hours to do can be done in a split second by a complex algorithmic system. The result is significantly reduced costs (god help the paraplanners) whilst increasing the time available to enhance potential revenue by concentrating on the more lucrative aspects of advice such as tax structuring and ultimately one cold expect serving many more clients.

Of course any such platform must eventually be able to head down the B2C route if it is to have the reach to become a true Uber of robo investment advice, but without significant financial backing to be able to sustain some trench warfare in the long road to acquiring clients it must first find favour B2B.

There are platforms (actually one i can think of) coming out of the states that have this capacity and I believe its only a matter of time before the incumbents embrace this revolution.

Glen Frost
March 11, 2015

Robo-advisers predicted to take min 10% of wealth advice sector in next few years; check out a Mac Bank Research report from 2014 that said 30% Aust banks top line revenue 'at risk' form fintech startups; from P2P to wealth advice, it's a confronting stat (for bankers), a huge opportunity (for fintech startups)

Sean McNulty
March 11, 2015

Very good article Graham, interesting read. Personally I don't see there being an Uber of wealth management, instead an Uber of personal finance. That is where the battle will be won.

Alex Lee
March 09, 2015

These folks are working on a prototype at the moment.

(Link removed in 2019 as it now goes to an unusual site). GH

January 05, 2019

Alex, is this link correct?

Graham Hand
January 05, 2019

Hi Steve, since the article was written almost four years ago (although still regularly cited), I think that 'prototype' did not develop, so we have removed the reference.

Graham Hand
March 09, 2015

Hi Alex, Good to hear from you. I sincerely hope you are right. If you know anyone who is developing a 'game' which can compete with 'Call of Duty' or 'FIFA 2015' for the hearts and minds of anyone under 30, it would be fun to look at it. Certainly don't know any traditional providers going anywhere near that space, but could be promising.

Felix Huxley
January 02, 2019

Superannuation is a legal obligation for the employer. You don't need the under 30's (or any age) to be "engaged" or find it fun. What for? Their employers are going to still direct the contributions into the super system regardless. Wealth managers don't care, and they will get engaged as they get older and see their balance rise to something significant.

There seem to be an awful lot of solutions looking for a problem nowadays.

Alex Lee
March 09, 2015

Hi Graham, whilst I agree with most of your assertions about what FinTech disruption in Wealth Management will look like, particularly that it will be driven by self service propositions offering better value for money, I think gamification also offers the potential to engage and educate people on the need for long term saving in a way that traditional providers find hard to do.

February 22, 2015

The future is hazy; see this link in particular about the banks; disruptive technologies (e.g. Uber)
where they say "Disruptive business models in the US are three to four years ahead of Australia"
As follows: Banks boast the largest profits in the country, they are also walking around with targets on their backs, as the next generation of upstarts bring a fresh eye and new systems to customer engagement not bogged down with yesterday’s technology.

Steve Blizard
February 20, 2015

I can't wait. UBER investment advising is what many clients really want, but bitterly opposed by the taxi drivers of our Industry, the Union Super Funds. UBER would return us to the period 20 years ago, when we were all a lot more productive. The solution is to reduce the sophisticated investor limits down from $2.5 million to $50,000. Then you will get rid of all of this cumbersome regulation "According to ASIC, if a person is certified as a sophisticated investor or a wholesale client, they do not require a Statement of Advice (SoA); the advisers’ best interests duty and related obligations under FoFA; and the bans on some forms of conflicted remuneration introduced by FoFA."
Bring it on.

Felix Huxley
January 02, 2019

Steve, so you are suggesting that the impediments are Industry funds which score higher on trust that retail funds, and which largely have delivered superior performance and lower fees, as well as exposure to unlisted assets such as commercial property and private equity that retail funds and most SMSFs do not have the capacity to match.

And the solution to this success is to water down legal protections for clients so that advisers can provide dodgy, conflicted advice that will deplete their client's retirement?

Rashmi Mehrotra
February 20, 2015

I don't think we need robo-advice or optimised asset allocation, since most people don't invest all their wealth in that portfolio anyway. What we need is trust. Investors trusting someone (or more) and that someone doing the right thing. I reckon disruption could come from not technology, but an old fashioned honest person who has the guts to be on the investors side.

Steve Manning
February 20, 2015

An AMP "investor document" reveals a "new approach" with an "omni-channel experience for customers" with a single online portal bundling wealth management, advice and banking.

The company also intends to expand its digital mobile capabilities and "refine and scale up advice approaches".

“AMP is also investing in services, platforms and digital capabilities to improve adviser quality and productivity."

Adrian Johnstone
February 20, 2015

You're right Steve - tools are getting way more powerful and accessible. Disappointingly the majority of established players in the wealth space are yet to embrace open architecture, leaving Advisers with disconnected and disparate tools.

Companies like Moneysoft are working to pull together rich client personal financial information and when you pair that with a strong industry CRM based tool like PractiFI you can get the aspirational single view of the client. Add in rich integrations with email, marketing tools like Campaign Monitor, lead nurturing like Auto Pilot, electronic signatures with Docusign and filing solutions like Dropbox and you have a fully mobile, real time solution that hits much of the above. Turn on a Drawloop integration and you can create merged documents that include all of the above. Social media monitoring and integrations already exist too through tools like Radian 6.

Interconnectivity of all this information is historically the issue. It all has to hang off a rich (and evolving) CRM core. That's available now through PractiFI. Pulling the information in, the triggering alerts to both the Adviser and the client is there to be configured.

Steve Manning
February 20, 2015

Software tools are getting more powerful and ubiquitous. Google's AngularJS for example is powerful and free.

Add fibre optics communication and the whole IT development process becomes 'democratised' - the man in the street with a great idea can have a go.

Dennis Plunkett
February 20, 2015

We have all seen masterchef, all given the same ingredients and time, but yet the outcome can be very different. What I see in this is that unless you are an experienced chief, it is hard to tell that there will be a difference until the taste test.

The same basic equation could afflict super, for most consumers it is not until the end that they taste the final result. So strategically what can you do to present not just the ingredients but a sample taste that is aligned to when the consumer is "open" to test

Ross Cameron
February 20, 2015

One thought to keep in mind is that of costs and fees - as I stated previously, technology providers tend to charge small fees for providing the technology space, and then try to ramp up the volume.

The comparison tools (iselect etc) don't directly add costs to the end client, the costs are charged back to the product issuers. It's a one-off cost on a per transaction basis (like Uber, Amazon etc).

Wealth is a different proposition - it's an ongoing service. Whilst there are discreet transactions, would clients want additional fees on top of an industry that already has lots of fees, both explicit and implicit, from investment manager, to administrator, to other intermediaries (brokers etc). Would an online solution that is a mix of comparison tool, data aggregator, financial planner and tracker towards targets, be able to charge ongoing flat$ admin fees? I can't see another % asset fee being acceptable?

Geoff Brooks
February 20, 2015

I agree Stephen, Much of the technology is there, but who pays for continuing evolution? It brings into focus the core issue - disruption may come from a technology company for which investment in IT infrastructure and interfaces is core business. Amazon is not a book company, Uber is not a taxi company, but both have applied technology solutions to sectors with eyes turned in the wrong direction when it came to analysing potential threats to their business models. Quite often this is due to investment already sunk into current structure, inventory and business architecture. Who says any business - wealth management or any other has any entitlement to continue in its current form, irrespective of investments already made in the business models?

Steve Manning
February 19, 2015

Great concept, Geoff, and like Ron's it could probably happen if enough money was available.

I know the banks have thrown a lot of money at CRMs and processes to entangle their clients in a web of cross-selling but these systems don't have the broad reach you are talking about.

Who is going to come up with the money seems to be the big question. The technology already exists.

The banks have the money to make anything happen but they want their advisers to control the process so their product gets sold. This stifles innovation and competition.

We need to find an investor.

Sean Graham
February 19, 2015

Hi Graham, it's an interesting piece and one that acknowledges that it's far easier to disrupt unregulated or lightly regulated markets than those protected and limited by a high degree of regulation. Innovation is occurring but it's driven by players unconcerned about maintaining their current market share and by players reframing the problems and moving beyond sustaining innovation.

Charles Moore
February 19, 2015

The issue here is actually Australian investors ( its their investments after all), not platforms.

But if one looks at the lag between AUS and the US, on such basic stuff as ETF's and almost any of the Charles swab offerings, one sees Australia lags behind by many years.. but eventually gets there, why? who knows..
Australian investors either seem to chance the same limited national assets and their increasingly poor value, or simply chase artificial tax advantages, franked credits and negative gearing, or the fact that borrowing rates are below cost, or even minimal returns these days ( property rents ect)..

The ability to directly own and have professionally managed to any mandate on a global basis for minimum fees has existed for at least 5 years to my personal knowledge.

Geoff Brooks
February 19, 2015

I struggle with these discussions because if I had the smarts to see where the disruption would come from and what form it would take, I would be receiving I much higher paycheck and demanding a big chunk of equity in the business employing me. Disruption usually occurs because the thinking and strategies of the people in a sector is framed by their own experience and, frankly, being battered in day to day business by hurdles to success like out of date legacy legacy platforms that cannot seamlessly talk to CRMs, analytics tools and consumer interfaces. When I happens, disruption will be driven by interface and content supported by technology that can interrogate in real time income, savings and spending behaviour in the context of goals pre-set by the consumer. Those systems could be linked with media sources that intelligently stream information on, for example, companies held in share portfolios or those on watch lists. You'll be able to tailor those news streams according to the amount or levels of information you want. An increased salary payment will prompt advice on how you can invest it, or how it can contribute to paying for the car you've been saving for etc. Prompts can be linked to a 'Go' button that immediately carries out the transaction associated with it. It's easy really. Let's get started!

Jason Kaye
February 19, 2015


Thank you for the article. Certainly one of the most insightful I have read - and as the founder of an early-stage Fintech start up in this space, I have read the lot! Can't wait for the next instalment tomorrow.

Where I would, with genuine respect, disagree with you is your comment 'I don’t see how any company can make wealth management sufficiently exciting for enough people to grow a market share of 5 to 10% in the next few years'

Now I could well be reading that incorrectly (and please let me know if I am) but in the context of the entire article, I took that as suggesting that one would have to steal 5-10% market share from incumbents in order to be deemed as being successfully disruptive.

I would argue that the real opportunity (or measure of success) here is not necessarily to eat the incumbents lunch (as tasty as that would be) but rather, to grow the size of the market.

Recently cited figures from the likes of Blackrock (2013 Investor Pulse Survey) and ANZ (2011 Adult Financial Literacy in Australia report) put the number of people in this country accessing financial advice between 15% and 18% respectively. Further, the Blackrock survey indicated that people earning over $150k p.a were significantly more likely to be receiving advice than those earning less than $150k.

A recent Datamonitor report is forecasting by 2017 there will be ~4.2m adults with a liquid wealth of up to $150k (which I appreciate is a different metric to $150k annual income).

Now some might get bogged down in arguing the veracity and applicability of the data sets. I'm simply suggesting that a digitally led experience delivering simple, easy to understand choices can make available to a much larger, and increasingly tech savvy audience, the types of investments, expertise, insights and strategies that have typically only been available to higher net worth clients (or perhaps because those with lower incomes/liquid wealth have seen the existing offering as overly complicated, clunky, conflicted and/or high risk). And further, that that can be delivered at a lower cost (entry point and fees) and with a significantly enhanced end-to-end user experience against what is currently available.

And if that brings a wave of new clients with new money into the system that existing providers have been unable to economically service (and therefore have not previously shown any interest in) then, well, who loses? Not the new to system client who has now got a dead simple and low cost way to get on the wealth creation pathway. Not the forward thinking Financial Advisory practitioners/firms who now have a new breed of client with new money to cost effectively start relationships with as they climb up the wealth curve. Not the Government who needs to find ways to plug the growing Aged Pension gap in coming decades (and who actively support financial literacy programs for that reason). Maybe the only losers will be the ones that haven't read the stories of the likes of Kodak et al or heard of an ancient Dakota Indian saying - when you discover you are riding a dead horse, the best strategy is to dismount.

Thanks again Graham.


February 19, 2015

Well just to add to the mix. I am late 50's approaching retirement and ALL my mates are into following anything "super". We are into the details and outcomes as it is within sight. I have drastically improved my own position over recent years with the help of an adviser. The cost of which is ridiculous, but I ask myself would I have made such changes without the advice? The answer is no.

I am also a FOTS (Father Of Three Sons). All in their early 20's. I have spent a lot of my time closing down numerous Super Funds and combining them each into a single ones over recent years. All those little holidays jobs, Uni jobs etc etc. I get them to sign things and say "one day you will thank me". We also have added to their funds so they get Super-Co contributions over the years and they all have healthy little balances right now but virtually no understanding of what it's all about or interest.

I agree 100% with Tony R. It is more about attitudes for the younger ones in particular that will help them later. Is this advice or mentoring or both? The smart phone apps etc is the only way to go to get the younger generation listening. Then you may have something.

Philip Carman
March 10, 2015

Good article. Interesting comments. To take up the new car/faster horse analogy, I think the key issue everyone's dancing around is that while most people understand them and feel/believe they know how to drive a car, and they're even kind of familiar with horsepower being useful, but when it comes to money decisions, many just don't have the confidence to act.
Or if they do, they may later discover (to their great cost) that they just didn't understand all the financial concepts they needed to in order to work their way safely and profitably through saving, investing, taxation matters, market timing and handling transactions.
Then there's the emotional intelligence required to be calm and thoughtful while making financial decisions - which few have - let alone dealing with the ethical considerations that tug at us all, if we're intelligent enough to be aware of those issues... It's no wonder people want help, advice and/or mentoring, but it's equally understandable that they're suspicious that those who charge for those services may not really know what they're doing, either!

Tony R
February 18, 2015

Very interesting discussion. My conclusion to financial success involves a critical component which seems to be overlooked. Of course you may need some form of financial product to house the accumulation of assets, whether its direct or managed. But this misses the point. I often put the arguement to my clients that the biggest impact on their fiancial success is what they themselves do. This is made up of many daily decisions they make. Things they themsleves choose to do or not do. The choices the make on where to live, what to wear, the cars they feel they need to drive, the choice about how to eductae their kids, the holidays they take etc etc. The list just goes on and on. Our job is to help our clients develop the type of attitude towards their financial success that ensures their probability of success is constantly improving. I'd like to see some disruptive approach to this. (Good luck!!!)

Adrian Johnstone
February 18, 2015

What a great discussion - I'm glad I found it. Lots of strong perspectives with sound and familiar arguments.

The issue is that they are familiar.

The missing piece,for me at least, is the perspective of what the customer wants to buy, not want the industry wants to sell. Many millions have been spent across all aspects of the wealth industry in the name of the 'customer' but none seem to genuinely look deeply at it. Instead the discussion is quickly co-opted into 'we have loads of legacy product X, how do we make it attractive?'

As an industry have we really stepped back and thought of the proposition from a young family starting out? or a young single getting a large pay-check? The conversation always seems to start with what product they'll fit into rather what are their aspirations and life objectives?

In a lot of cases people want a Financial Mentor more than an Adviser - the little voice on their shoulder telling them that the holiday is ok to have and the car is ok to buy, as well as checking they have travel, health, life insurances and a long term plan. They want the same person to help navigate first home buyers schemes and tax returns.

The area I hope to see innovation is through the amalgamation of Advise, Broker and Accounting services into a true mentor role. The technology to support the client relationships is already available and in reference to Steve Manning's last post - thankfully I don't see Robo Advice being able to compete.

I appreciate that regulation is a challenge, but it is just that, a challenge not a barrier. In an industry the size and strength of ours surely we have the collective power to innovate.

Frank Ashe
February 18, 2015

One of the best articles I've read on the subject!

A few quibbles.

1. Attacking the value chain. The Disruptor doesn't need to attack all of the value chain. Where value is being transparently added the client is usually happy. What the Disruptor needs to do is increase transparency of the whole value chain and have a replacement for those parts where value for money is not gained. The client has the choice of keeping those parts of the chain that give them enhanced value.

2. Price led. As above - it's going to significantly reduce the price of the dud parts of the value chain. That's enough to gain acceptance.

3. Well capitalised and market trust. These are two different concepts. By removing the dud bits of the value chain the Disruptor will be able to leverage off the trust that inheres to the bits that are left in. There will be a positive feedback loop between any trusted part of the value chain and the Disruptor.

4. Technology based and self-service. These are essential for the Disruptor to gain traction, but it must also be able to be used as an adjunct to other services.

5. Break established distribution networks. No quibbles, that's the whole point of the exercise.

Steve Manning
February 18, 2015

Select/comparator tools are proliferating and usually allow the user to make an informed decision. iSelect and Compare the Market must have an enormous advertising budgets which suggests these services are working for them.

A managed fund comparison tool, backed by a marketing campaign questioning who benefits most from the recommendation of an aligned adviser would get some traction. Although this may be slow in the beginning it would only increase.

Most people would focus on costs and performance which are easy to extract and rank. This doesn't paint the whole picture but they are the two factors with the greatest impact on final benefits.

Past performance doesn't predict future performance but does suggest a competent investment team.

If the tool showed the impact of costs on the final value it would make it harder for advisers to push an expensive product from their APL for which they are rewarded. Class actions may increase and would be very hard to defend.

Although costs and performance would probably be a client's focus, it would be easy to also show ancillary benefits.

I am not convinced a recommendation from an aligned adviser is better for a client.

The success of the service would depend on marketing and ease of use.

Tony Lally
February 18, 2015

The disruptors to date, Amazon, Uber, Airbnb etc use online tools to replace a service/product required or chosen by a customer. Customers always chose books, holidays, taxis etc. They knew what they wanted, so they understood the value proposition offered by alternatives.
In super, the SMSF market shows that customers do not understand super. They have flocked to this segment largely by being physically "sold" what was said to be a better priced outcome. Few understand or are able to analyse if it is a better outcome, because they will never be able to compare, in the same way as they can compare book prices. In most cases, they are "advised" across a number of disciplines. The important aspect here is the physical connection with an expert.
The Schwab model (and Fidelity etc) was originally very successful as a direct distribution model. The formula was simple, get a 4 or 5 star rating from Morningstar and then sell the product by the truckload through ads in Money magazines. Then the internet augmented magazines but the process was the same. Eventually, after buying 4 or 5 products, customers found they were confused about what they had and needed advice. In response Schwab rolled out offices across the US.
The message from these examples is that the investment process is complex, while super is both complex and difficult to understand. The default system in Australia works because of this complexity.
I believe a disruptor would have to become a default if it were to become successful, and it is difficult to see that happen. A term deposit or a mortgage are simple and rates can be compared. An investment product is understood by very few people, including advisors. They are reliant on intangible measures and analysis by other experts to choose a product for a customer. It is difficult to see how an Amazon type disruptor can capture this space. When one hands over one's life savings, or a large part of it, one wants confidence in who's on the other side, and generally one wants to see them.

Rod Dew
February 17, 2015

mFund is a disrupter.
Low cost direct access to funds via ASX brokers and settlement processes. Unit priced funds aren't as volatile as ETFs and NAV calculations daily ensure that the valuation is in line with underlying asset valuation.
Could it be that the large bank brokers aren't represented on mFunds because it disintermediates their wealth business platforms? Perhaps planners don't want their customers to know about this?

Ross Cameron
February 17, 2015

To summarise, we're back to engagement.

Industry funds have gone down the path of non-super membership benefits, even to the extent of ME Bank, or shares to get access to shareholder discount cards for retail shopping.

Dennis raises a good point - how to sustain that engagement for 30+ years. It probably doesn't have to be daily, but annual or bi-annual statements won't cut it either. And for the other side of how a community values super - I'd suggest that as other more experienced commentators have stated on previous fora, as the Baby Boomers move into retirement, and start to hit some hurdles, they'll be having the conversation with the next generation.

Hmmm, perhaps there's something to tapping into the intergenerational side. As an individual, you can't control how gov'ts will spend budget on education (more debt), public transport (more tolls), health (co-contributions) etc. But there is one thing that you do have some control over... Fear factor could be a part of the pitch.

Dennis Plunkett
February 17, 2015

This is a fantastic discussion. From a marketing perspective how do you make something that will not yield results for 30+ years attractive?

Even more you are 35 and you look at your balance (We are primed to think of numbers rather than the island in the south pacific) and you think wow it equals my wage, but... I don't get to touch it until I retire, how is that fun, how will that help me now or next week or even next year?

Perhaps that is the rub, retire, how do we view that? Then there are the daily pressures of the mortgage, school, car holidays and the ever increasing bills

As we move more towards a now society how super is valued may need to change.

Steve Manning
February 17, 2015

It's true. Anyone who can make super 'sexy' to Gen X or Gen Y will do well. Gym membership? Holidays to Bali? Online competitions?

Most of them see retirement as something that happens to other (old) people.

Graham Sammels
February 17, 2015

If there’s a disruptor, then it’s the party that can make super not necessarily ‘exciting’, but meaningful to the 6m-7m working Australians who either don't really care and/or understand their super (the 'dis-engaged').

The successful disruptor may not have the best investment returns nor the lowest costs. Instead they will give these multitude of workers a tangible reason to join and stay with the fund for an extended period, and additional reasons to contribute a little more to provide for their future retirement.

It is difficult for a fund to be relevant when in the first instance, it wasn’t the individuals choice to save 9-10% of their wage (it’s the government that made it compulsory) and secondly, for many, the reality of retirement is decades away. So, if someone wins big and turns the market on its head, then it will be the one that maintains some sort of meaningful relationship with their customer over the long haul. For that to happen, the winner will consistently give the customer something of value, besides their money back in 20-30 years.

Technology will be the enabler for the disruptor. However, as always, it is the art of how the technology is applied where the real difference and impact is made.

Jayson Bricknell
February 16, 2015

Really interesting article - everyone has been struggling to find the next big thing for a while now.

For me I think reason 3 is key ("be well-capitalised and carry a great deal of market trust"). When you look to the future and the fact that there will not be enough investable assets in Australia to support the levels of Superannuation savings, then it is going to take someone locally that is well-capitalised and has the market trust to support the "sound long-term" offshore investing that will be required.

I also believe that the incumbents need to be the disruptors or they face becoming the next Kodak, Borders or Nokia. It's a case of disrupt or be disrupted and they cannot afford for that to happen.

Ross Cameron
February 16, 2015

Cheers guys, latest comments look like disruption to Distribution/Vertical Integration - advisers & accountants.

One aspect to keep in mind is that of strategy. It's one thing to have a single view, find best price or lowest fees. It's another thing to know how to use this access to achieve long-term wealth. Any punter with a bank account can buy a stock easily enough - doesn't mean they'll make sound long-term investing decisions.

But, couple access with robo-advice/template strategies, and there's the beginning of something interesting (would obviously require more components to be truly useful).... But as Steve has stated, the big banks won't just hand over control of distribution to an unaligned third party.

Ian Bailey
February 16, 2015

Great article. Comes close to what I have been developing for almost 6 years. I have developed the Xero of funds management and believe the "simple" today is down to direct ownership and accounting.

There will always be those that will pay for IP but many believe they can do it themselves.

Platforms have been about reporting and making life easy for advisers and Dealer groups. If we think about on line accounting products that today can import financial data and create reports and calculate positions it is not hard to see clients moving away from advisers that do not have anything but reporting to add to the value chain.

With direct share ownership made easy by sound accounting , mFunds , Bonds , and other instruments coming to the retail market it is now possible for clients to run and manage their own investment portfolios.

Add model portfolio selection and research to the product and you have the full gambit .

Chris McGlinn
February 16, 2015

A lot of the technology (probably) already exists; just at the moment it hasnt been adapted to the world of finance and investment. Its called "Google". Google is not a financial advisor, but ...
If you doubt this think about the type of people and skills hedge funds and HF traders engage with. Its very much based on algorithms and rules being applied to huge quantities of information quickly.
We should be very careful applying a narrow Australian perspective to this. Uber, Amazon, Google etc exist because of the size of their market – Australia is a flea on an elephant, albeit a fat juicy one sometimes.
For my part the real skill will be being adaptable and nimble enough to take advantage of this as it rolls out, rather than coming up with cleaver ways to frustrate, delay etc.
Real disruption usually comes from outside the system because there is little incentive for the existing players to rock the boat, let alone build an entirely new one.

Greg Einfeld
February 16, 2015

Graham - thanks for your thought providing article.

I certainly agree that the wealth industry is ripe for disruption. It is hard not to agree although I'm sure there are many burying their heads in the sand. In relation to your 3 points:

1. "It will not attack one part of the value chain, it will be end-to-end with a complete investment solution" - I don't think this will be the case. The value chain is much broader than we all realise.

For example, if the value chain includes investment advice (which it does), then it needs to incorporate other types of advice - strategic superannuation advice, budgeting and cash flow management, insurance advice, etc. If so, the value chain then extends to superannuation products and insurance products. We have a very large value chain.

Similarly, if we consider fixed income investments, (which might form part of the investment value chain) - consider how fixed income is invested. The assets are ultimately lent to a borrower. So to capture the entire value chain you would need to have lending capability and distribution (eg mortgage broking).

Can one organisation do all of this? Yes this is possible but unlikely.

It is also important to consider the structure of the wealth market versus the examples provided - Uber, Amazon, Google, Apple. These are all 2 sided marketplaces which demonstrate strong network effects. A network effect results in a significant first mover advantage. Buyers will always use the incumbent platform because that's where the sellers are. And sellers will always use the incumbent platform because that's where the buyers are.

Wealth doesn't work that way. In wealth the first mover advantage stems from scale (and therefore cost advantage) and brand. These are not as powerful as a network effect.

Incumbents also have the advantage of distribution channels, although this is about to get blown out of the water as described below.

2. "It will be price led" - yes it will, although technology will allow innovations in other areas apart from price. So ease-of-use and independence may also form part of the proposition.

3. "It will need to be well-capitalised and carry a great deal of market trust" - While true, this is a paradox. Incumbents, who may have market trust, don't have the agility to disrupt at the scale proposed. In addition, they have too much to lose. They may acquire a disruptor as an each-way bet.

New entrants into this space will be capital constrained, at least initially. Nobody is going to pour tens of millions of dollars into an unproven model, especially if margins are thin. So the successful organisations here will use the lean startup process. They will start small, find a model that works, and then invest in growth. This process takes time.

4. "It will be technology-based and self-service" - yes, it has to be. That is the only way to bring down the cost. Early adopters are likely to be the younger generation who are more tech-savvy. Although those people are less engaged in their wealth and have less wealth to invest. So once again, this will take time.

5. "It must break established distribution networks" Yes it will. Of the 3 areas highlighted for disruption (advice, admin platforms, asset management), I would argue that the second and 3rd are already being disrupted. The reason the disruptions haven't become mainstream is that advice (ie distribution) is still living in the last century. Note I consider advice and the distribution network to overlap considerably.

Whoever disrupts advice will have significant influence on what happens in the rest of the industry. The current advice model is expensive, conflicted, limited, inconsistent, and cumbersome. It needs to be disrupted.

WATCH THIS SPACE (bold, underline, flashing lights).

A final note on speed. This will be a slow process. I could write lots more on this but I am reaching LinkedIn's limit on length...

Christian Eriksen
February 16, 2015

A great read, Graham.

I believe the disruption will be a combination of innovative use of technology to manage the distribution of funds, and combine it with no-nonsense, transparent financial products.

The join venture between Alibaba & Tianhong Asset Management Co in China is a great example of this. This illustrates how easy access to the right platform and product can transform the distribution of funds.

Users of the online Yu’e Bao platform (approximately 50 million in total) can invest as little as $0.16, thereby providing access to investment products that in the past was only accessible to the wealthier population. This has seen the asset management company grow its money market fund from nothing to a staggering $65 billion in just 12 months. A phenomenal growth rate in the fund management industry - true disruption.

Steve Manning
February 16, 2015

A killer service if it ever becomes a reality.

I am sure the banks will do everything they can to frustrate it. All the extra admin on their part just to increase the possibility of an easy switch to a competitor's product.

Still, if the client instructs them to make details available to the new service they have to comply.

Ron Mullins
February 16, 2015

This is a great discussion.

In terms of innovation – the financial products themselves won’t drive the step change being proposed here… but rather the way consumer’s access and use products will be. If you take the uber or AirBnB example, they provide the consumer driven platform – regardless of who the underlying product provider is. These innovative platforms initially offered ease to a wide choice of products, offered tracking of consumption, a personalised view of the relationship between the provider and consumer, and some examples matured to product development.

So if innovation comes from solving a problem -what’s the problem here to solve? I propose that it could be that consumers hold lots of different financial products from different providers but can’t simply access a holistic view of their wealth. Beyond this, it's time consuming and difficult to research products from different providers.

My view is the innovation in the wealth sector will come in services that consolidate multiple products (and providers) and provide the consumer a platform to view and manage a holistic wealth picture. There is much research that reflects individuals hold multiple products with multiple providers. From this will come the ability for individuals to have a single snapshot of their wealth, and ultimately become a vehicle for distribution? Some of this innovation exists with entities like

To some extent some providers, such as banks allow a single view of the bank/client relationship in the form, of displaying accounts, super, investments, loans etc. but the winning move will be to have a platform that is provider agnostic.

The financial planning industry has been doing this for some time, through the manual harvesting of information. These platforms aren’t driven by consumers, and a simple platform that allows individuals to view, review and manage a range of products from providers will be compelling.

Imagine this – you access a service on your phone, computer or tablet that give you a snapshot of all your financial products – provides a net view of your wealth position, tracks your movement to a target and then lets you select financial products from multiple providers that are in line with your needs. Competing market forces then kick in at the product level on price, benefits etc etc.

I look forward to part 2.

Ian Kredulis
February 16, 2015

"All men dream: but not equally. Those that dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make it possible." - T.E Lawrence (Lawrence of Arabia)

Steve Manning
February 16, 2015

There is a lot of apathy and a managed fund 'comparison tool' may have little demand especially if no-one knows it exists. Ongoing TV advertising like iSelect, Compare the Market etc would be needed.

If it was used then the 'vertically integrated advice' model could be in trouble. It would make it a lot easier to challenge the recommendation of an 'aligned' adviser who pushed their master's product and was rewarded for doing so.

Ross Cameron
February 15, 2015

I find it difficult to see how disruption could occur in the wealth space, if we're talking about access to managed investments, or even directly listed securities. The big internet companies accelerated existing human capabilities. As Stephen Huppert pointed out, ride sharing is nothing new. The internet is a way for an intermediary to create a marketspace for bringing together people who have something, and people who want something, whether it be a,,, ebay, gumtree, etsy, Amazon etc. These companies operate on a mass volume basis and charge a small fee for bringing buying and seller together.

I'd go so far as to argue the internet phenomenon has already hit the wealth space. We already have E-Trade and the like. We have crowdsourced funding of start-ups and a range of investments - noting Australia has yet to go the NZ path of crowdsourced equity. We've even had online advisers who rebate fees/commissions, and take a small clip of the ongoing asset fees.

Would a wealth disruptor be the equivalent of what an iselect or comparethemarket is for general/health insurance? I.e. another online gatekeeper to the investment/fund manager charging a smaller clip for referring investors? Will the investment/fund managers and their owners forgoe or share their existing gatekeepers with one that forces its way in?

In terms of super, the biggest problem is that in one sense it is an artificial industry. The Gov't enforces savings on it's citizens, hence the need for default arrangements and problems with engagement etc. This provides opportunities for intermediaries to operate in this space and 'incentivise' prospective clients. iselect was an intermediary for an industry that didn't have anything like it previously. Wealth/super already has intermediaries in terms of advisers (Retail), accountants (SMSF), employers (default/industry funds), and many players exploring direct to client options too. The internet relies on people who are interested enough to enter an online market space, whether buyer or seller. It'll be difficult to operate if only one party wants to come to market.

Simon Messenger
February 15, 2015

AMP already has AMP Direct, which was AXA Direct. It was created to serve customers who had broken off their engagement with their financial planner.

Steve Manning
February 15, 2015

I'm sure the banks and AMP are looking at the future and have a realistic picture but need to keep the existing structure stable and so don't let their aligned advisers know what they are looking at. Their advisers can't know they are looking at a competing model.

If they aren't looking at a new 'tech' model excluding advisers they have their heads in the sand which I doubt.

Stephen Huppert
February 15, 2015

A big part of the success of Uber, Amazon et al is the uncompromising focus on the personalised customer experience.

When I was at uni in the 80s we shared rides in the same way that Uber does. There was a notice board where drivers and passengers could hook up if they were going to the same area. This is not Uber's innovation. Uber's innovation is the ease with which customers can use the service via their smartphones.

When I make a purchase at Amazon, I can track the order and can see what others who made this purchase also looked at.

The other factor that has driven the rise of Uber and airBnB etc is the way they operate at the edge of the regulations (outside, some argue).

Superannuation funds need to look outside the industry for examples of superior customer experiences. The expectations of members is being set by the Ubers and Amazons, not other superannuation funds or even other financial services entities.

Douglas Bucknell
February 15, 2015

Graham, the best read this weekend. I believe it is pertinent to respond to this article in reverse order (end to start). I am looking forward to Part 2 on disruption in the value chain. Your conclusion of a massive changes in wealth management yet no entity growing market share by 5-10% quickly is on the mark. Yes superannuation is an active area, driven by developments ‘nobody has yet thought of’/technology not yet implemented and probably via small start-ups– but that is where our views start to diverge.

You mention the need to capture the heart and minds of investors by making the product either sexy or driving fear – but what if the ‘Uber’ is not in the $600B SMSF sector, nor the ‘choice’ segment but rather the MySuper disengaged $500B trustee controlled default third?

If this is the case, it won’t be so much a competitive issue. The disengaged, maybe nudged to engage - the good existing distribution channels may swell with volume. The Trustees will implement, they are well capitalised, they are beyond reproach and ‘trusted’. It may not be price led, but rather efficiency led because the current one size fits all 70/30 default option must be one of the most inefficient uses of investment horizons and available risk tolerances left! Disrupting the value chain at the Trustee between superannuation administrators and superannuation custodians before the asset managers would have significant flow on impacts. It would solve the problem in a novel way, and spread quickly on the products success. Of course I am talking about a MySuper Lifecycle Mark2 product that uses factors beyond just age to automatically tailor investment options to known (by the trustee) default members characteristics.

The ‘usual’ way of breaking wealth management into 3 parts may not be the full picture or hold into the future. This is why I am looking forward to part 2 ‘where is the value chain vulnerable?

Sarah Penn
February 15, 2015

Virgin wasn't really doing anything different though. I really do think that everyone just tries to 'build a better...' Rather than thinking about exactly what the problem is that they are trying to solve.

Steve Manning
February 15, 2015

Hopefully they will provide a good case study for the next group to try.

It may be a slow evolution as technology/ tools get better and faith in bank advisers continues to wane until the climate is 'just right' and the public embraces it.

Simon Messenger
February 15, 2015

Virgin Money and Virgin Super tried and failed to break into the Australian market despite a big budget.

Steve Manning
February 15, 2015

Great article.

The banks (and AMP) are an oligopoly offering much the same products in much the same way - a bit like petrol where the main difference is the company logo. There is little innovation and never a price war.

A well capitalised 'new comer' with a handsome marketing budget offering a cheaper alternative (probably thanks to technology) will challenge them and I am sure it isn't too far away.

The SMSF sector has proved many Australians like to do their own retirement planning and seem to have an unexpected competency for doing so. They just need the tools and the options.

Sarah Penn
February 15, 2015

There's so much innovation going on, but to paraphrase Henry Ford, just about everyone is still building a faster horse. There's a few glimmers of hope. But there IS a tidal wave coming, we just can't see it over the horizon yet.

February 14, 2015

Great article Graham and something many have been considering over the years but you go through the arguments well. Those who feel there will be a new major player seem to ignore a big issue. That is that many under 45 with 25-50 years to retirement simply have no interest in their Superannuation. Indeed as other more relevant issues like finding sustainable employment, buying a home and the cost of raising children all demand people's primary focus, retirement funding will fall further down the priority list making it harder for a breakthrough new offer capable of securing market share of the $100 Billion variety.

Greg Bright
February 13, 2015

That's a way-too well reasoned article, Graham. You're raising the bar too high for fellow journalists. My feeling is there is a little boom happening in fintech. It has a whiff of 1999 about it.Take "robo-advice". If you put the term in a headline can can generate double the click-throughs of the term, say, "calculator". But what's the difference? Does my laptop need to be licensed if I am receiving robo-advice? Certainly, the code-writers and their employer who built the calculator are unlikely to have an AFSL.
So, robo-advice is the Uber of funds management. It may be illegal, but it will get so popular no-one will be able to enforce its stoppage.

Scott McConville
February 13, 2015

Great article Graham.
Wouldn't we all like to be the creator of the next big thing (especially in the wealth industry), gets the brain ticking over that's for sure.
Looking forward to Part 2!

John Beggs
February 13, 2015

Predatory pricing cases are generally not easy to prove. Notwithstanding the allegation by Quidsi that Amazon lost $100m in bringing Quidsi to its knees, proving such an allegation in court can be exceedingly difficult. Since the alleged violation was against Section 2 of the Sherman Act, and the indemnity payable was triple damages, Quidsi (or fee for outcome lawyers) would have had significant incentives to prosecute the case. In general, the US Federal Trade commission has not had much success prosecuting predatory pricing allegations which is probably why they passed on the opportunity to prosecute the Quidsi-Amazon issue. Predatory pricing was never established in the Standard Oil case, and FTC gave up on the long running DuPont case in the 1970’s. The only small victory was against Borden in a case of retailing reconstituted lemon juice, and even those finding were watered down. Aside from the issue of quality of evidence, many of these cases failed because it was difficult to establish that the consumer was materially worse off as a result of aggressive pricing by an incumbent.
At a visceral level, there is something objectionable about a large company destroying a small competitor, and our sense of “fair play” makes it very easy to support legislation such as Australia’s Section 46. The Barnaby Joyce and Senator Brandis second reading speeches in support of the so-called Birdsville Amendments (2007) promote this interpretation.
At the level of conventional economics, there is concern that predatory pricing leaves “one man standing” and monopoly prices.
However, in businesses that rely on modern IT, the competitive landscape can change very rapidly. Disruptive competition in a rapidly emerging new technology is part of the mechanism for making the economy as efficient as possible and as quickly as possible.
I wonder whether Section 46 tacitly provides elements of an excuse for some large institutions to step away from aggressive competitive pricing.

February 13, 2015

Great article, very informative and also by the respondents
Where Peter mentioned
"There are some people who have seen this opportunity and are moving to fill the gap, "
anyone aware who these people are?

Chris McGlinn
February 12, 2015

Great article which puts out some well reasoned challenges to the hoopla in the press.
What makes me a little uneasy with the conclusions being drawn is that serious real disruption rarely comes from within the "industry".
If you think about Uber for example, this did not come from a couple of taxi business owners deciding to change the world, why would they when they have so much invested in the now. If you take this argument outside IT and the internet, the disruption which occurred to BHP Steel from the introduction of mini-mill steel mills did not come from existing incumbents - it came from someone outside looking at an opportunity to slice off a profitable segment by doing something different. It does not take too much thought to find other examples.
I also don't put too muck stock on the fact that these businesses often lose a lot of money or that "fintech has a whiff of 1999 about it". Google and some others survived the tech wreck despite their losses and left the competition for dead ... and a lot of the things the nay sayers said at the time would never happen have in fact come to pass - it just took a (long) while. Who remembers the Apple Newton, who bought one?
Our industry is geared to taking fees for active investment management and the like but there are people out there who don't make their money this way. It's very profitable and highly regulated - just like owning a taxi licence or making and distributing steel used to be.

Dave Rae
February 12, 2015

Great article Graham.

I was interested to read in AFR this week that more money is going to fintech startups in Australia than any other sector. The rapid growth of those you mention such as Wealthfront has not yet been seen here.

I agree, it is difficult to see a new entrant taking a market share to worry the big banks and fund managers. What would be concerning however could be a major disruption to pricing.

The CEO of Wealthfront describes their service as:

"a simple and transparent service providing personalised portfolio management layered with certain investment strategies previously available only to ultra-wealthy folks, such as tax-loss harvesting."

“And we do it at an incredibly low price—it’s free under $10,000, and we charge just one-quarter of 1 percent for amounts above that,”

65 percent of Wealthfront clients are under age 35 - that will be the initial growth market here too.

I strongly believe in the value of advice but if an advice offering is nothing more than investment management dressed up - you should be worried about this.

Peter Vann
February 12, 2015

A great article Graham, and gaining recognition from colleagues too!

I firmly believe that if someone can crack delivery of sound and relevant information (or is it advice) to investors at a reasonable cost, then they potentially have a winner. Furthermore, if that is embedded within a framework optionally offering suitable admin, or links to cost effective admin, and access to investment capability, the win is even bigger.

Unfortunately too many current wealth providers are keeping their clients/members in the dark by not letting them know how they are tracking towards their end goals (e.g. estimated retirement income) and the impact of their decisions on their end goals. There are some people who have seen this opportunity and are moving to fill the gap, and some aware of AFSL requirements. Most existing industry players are at risk of missing out since they are too focused on current business and not moving forward to meet the most important of client needs.

Graham, again a timely article and it will be fascinating to follow the evolution of the delivery of wealth management over the next few years.


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