Australian investors are the beneficiaries of technology-led disruption within the financial services sector as operational complexities are being continually reduced, according to Shannon Bernasconi, managing director of WealthO2.
The combination of better managed data, as well the streamlining of documentation such as the Record of Advice, is driving efficiencies for both advisers and their clients, with technology also serving to remove intermediaries and their costs. The impact of technological disruption is becoming particularly evident within superannuation.
Ms Bernasconi points to reports the ASX is set to roll out large scale disruption that will bring about savings and improved investor returns.
“The ASX innovation will allow super funds to more easily directly connect to the ASX and bypass the layers that can cause data errors and additional costs.
“While some progressive super funds will approach this opportunity at an omnibus level – such as a single HIN to replace the custodial layer – there is also the current opportunity of the HIN member level direct connectivity (for example, in the WealthO2 Super Simplifier),” she said.
The operational costs embedded in super come from the multiple parties involved including trustees, super administrators, insurers, custodians and regulators.
“For those invested in Australian direct equities through a super fund, for example, there is often a custodial layer between the member and the ASX which is opaque and costly, and limits the range of corporate events the member is eligible for, such as share buy-backs and placements.
“HIN-based super allows the member to have full transparency on the underlying assets held on their behalf, and eligibility to all corporate events. It’s the advent of technology and data connectivity that has allowed this to happen,” she said.
Technology is also disrupting the value chain of advice. While the banning of grandfather commissions will remove hidden fees from the value chain, technology is removing entire layers. Additionally, the removal of ‘shelves’ that traditionally hosted fund managers and, more recently, SMAs, at an increased cost to the investor.
“The investment option shelf within a super fund is an opaque layer that also potentially increases costs. In removing these shelves, a saving of five to ten basis points can be gained by the investor.
“Only recently has the cost of operations been significantly reduced by using technology for administration and to ensure data quality through automation of validation tasks. Why haven’t these layers been removed sooner? Times have changed in the advice industry, and technology needs to be regarded as the best means to innovate and remain relevant,” said Ms Bernasconi.