A confluence of factors has driven the need for financial advisers to deliver advice in a more efficient and cost-effective manner while enabling greater focus on customer experience.

The nimbleness and flexibility of managed portfolios has proven they can service these needs as well as adapt and evolve to the changing landscape of financial advice. One of the largest drivers of change in the Australian financial services industry over the past few years has been the dismantling of vertical integration, which has been the dominant structure for the past 20 years. The release of the findings from the Financial Services Royal Commission in February 2019 gave further momentum to this trend, challenging the vertically integrated model and questioning its capacity to meet the best interests of the client.

Changes to professional standards, increased paperwork and regulatory controls, the removal of commissions and the push for greater transparency, have challenged the traditional structure of financial advice and forced many advisers to seek out a new model.

Meanwhile, consumer demand for unconflicted advice where the separation of product and advice is clear, applies further pressure on pricing.

As licensees began to broaden their platform Approved Product Lists (APLs) to provide greater investment choice and to help meet compliance and regulatory expectations (including Best Interests Duty), dislocation in the advice market has grown.

Advice practices and licensees are choosing to build their desired business model around a platform which effectively administers the investment function for them, can assist with Best Interest Duty compliance and can assist the adviser build value around the provision of advice.

Central to this trend has been the adoption of managed portfolios. While managed portfolios have been available in the Australian market for more than two decades, the breakdown of vertical integration has resulted in the opening up of ‘best-in-class’ options and the ensuing re-engineering of advice delivery has seen financial advisers favour tech savvy independent specialist platforms.