As a partner in a large FP Practice, this excites me on many fronts, and has the potential to change the landscape of the FP industry. I wanted to share my thoughts from both an IAM shareholder, and FP business owner. I cannot speak for the whole industry here, but I imagine a good part of it.
The majority would not be aware how poor the majority of tools and software we have at our disposal is. We are still using far too many excel spreadsheets, continually manually entering the same data 3 or 4 times into different systems that do not talk to each other – not to mention the actual generation of a SoA itself, which requires a lot of manual input and manipulation. Most of the talk regarding $300-$500 seems appropriate. As a practice that turns over in the vicinity of 1000 SoAs per annum, combined with another 20 admin staff at varying stages of the process (not related to SoA production at all), our back office costs stretch well above the $1m mark per annum (remember, a single practice out of nationally 2600). I have not seen the detail of what processes Integer will cater for as far as office operations, and obviously, it cannot replace the whole back office, however, do your sums on 40% savings and you can see the potential, even if particular services not available on day 1.
A few have mentioned the threat of legislation – which for IAM shareholders I wouldn’t be concerned. The disclosure requirements are not going anywhere, but increasing, and whilst Superannuation may become less attractive, advice for those clients is even more important and complex as we have to move towards investments outside the superannuation system.
Offshoring work isn’t new, with many businesses already doing so to varying degrees, including ourselves. The challenge has always been, data protection and security, and I'm sure a lot of clients would be uncomfortable knowing their personal information has been sent to India/Philippines.
I get the criticism, that offshoring is taking away local jobs. I don’t buy into that. In fact, the opposite. The majority of the roles that IAM replace, would be reassigned to other more interesting roles up the chain, such as strategy research, usually higher paying which takes up the time of planners currently. The less time planners are spending with admin, and the more time speaking to clients, the numbers of advised clients will increase, leading to more SoAs, better client relationships and more profitability for both practices and IAM.
Many would not realise, that less than 20% of Aussies have sought financial advice. Why? No doubt cost is a major player, with a cost of approx $2,000 to get in the door, mainly driven by onerous legislation requirements, however, inefficiency in practices is likely another factor. Increased efficiency, should enable the advised market share to increase significantly beyond this 20%, leading to greater quantities of SoAs being prepared.
Is Robo-advice a serious threat? I don't think so, as the majority of our clients do and always will, prefer the face to face interactions with advisers. I have always seen robo-advice as either a tool to help us do things more efficiently, or, an offering likely to be taken up by the 80% not currently seeking advice.
We're all waiting for announcements, however, should we see an AMP/big 4 named as not only significant players in the capital raising, but getting right on board and behind the company then I think this will take us to the next level.
This is almost a perfect storm of circumstances coming together, being an absolute need for disruption, legislation putting downward pressure on revenues, an expert team leading the way and very little competition (if any). The first mover advantages are huge here, and once market share is captured, there is no looking back. If this doesn’t work now – then it never will.
Take out of this what you will, however, we can't dispute the extreme potential. I will leave the short term price predictions to others, however, at current market cap, not sure you can go wrong. However, I’m sure that if the team get this right, then the SP we have seen predicted by a few in recent days, may only be the tip of a very lucrative iceberg for us all.
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