Merge or aquire? Why #fintech is critical to achieving scale in financial services

It’s easy to become jaded by too much hype on any topic. But the ubiquitous discussion of “fintech” at the moment is entirely merited. Fintech has reached a tipping point. It’s become a critical component of success in financial services. Whether you’re selling financial products, providing financial advice, managing retirement and investment funds, or offering insurance, fintech has the power to make or break your business.

But it’s not just about beating or losing out to competition. In the volatile and predatory arena of financial services, success is often manifested in M&A transactions. Will you be forced to merge your business with another when the competition gets too hot? Or will you be in the ascendancy, dictating the terms of an acquisition? That distinction boils down to the simple matter of scale, and nothing is more critical to scale than fintech.

Whether you’re selling financial products, providing financial advice, managing retirement and investment funds, or offering insurance, fintech has the power to make or break your business.

Managing initial growth badly can kill a business in its early stages. But as the business grows, the challenges start to come thick and fast. First it’s hard to acquire talent, then you’re faced with motivating and training a team, building a reputation, selling and marketing hard and managing cashflow, all while competing and meeting customer expectations.

David Stephen is founder and CEO of Invest Blue, one of Australia’s premier AMP-affiliated advice practices. David says “as a multi-site business operating in a heavily regulated environment, our clients need us to have streamlined management and advice delivery processes.”

“We believe our clients should not have to pay for legacy systems and legislative obligations”.

David knows that the right technology platform is critical to managing the challenges of scale successfully.

The future winners in financial services have a scalable technology platform that can easily on-board new employees, add additional service offerings, manage rapid customer growth, automate workflows and integrate easily.  If you’re stuck with a complex and expensive upgrade or integration crisis at every turn, the path to growth is just so much harder.

Just last week, AZ Next Generation Advisory acquired Fortnum-aligned Priority Advice Group. PAG Managing Director Larry Fingleson told Financial Standard:

Our board and shareholders have chosen to partner with AZ NGA because we believe that the transaction … ensures that for at least the next 10 years the Priority Advisory Business is supported and secure as we build and develop solutions that are best of breed and enable and support our clients’ goals and aspirations.”

In other words, ‘we accepted this deal because we lack the infrastructure needed to scale ’. PAG was founded in 1987, so there’s a succession narrative here too. But it’s hard not to conclude that like many smaller financial services businesses, PAG’s options were limited by technology systems that don’t scale.

It doesn’t have to be that way. The secret is to invest in an industry cloud platform — and trust me, it’s inevitably cloud —  and worry about point solutions afterwards.

The future winners in financial services have a scalable technology platform that can easily on-board new employees, add additional service offerings, manage rapid customer growth, automate workflows and integrate easily.

Moving your business to an industry cloud platform gives you the flexibility you need to scale. You can make the most of your existing point solutions while you gradually integrate all the applications and services you need to underpin growth and to scale successfully.

An industry cloud platform that’s configurable and extensible means your leadership team can watch the road ahead and not the rear view mirror.

Once established on your platform, you’ll have established your core information architecture and core processes. When M&A opportunities then arise, you’re in a position of natural ascendancy. Your business is attractive because it’s under control and built for scale, positioning you naturally as an acquirer, not a merger.

With the right technology platform, it’s easier to integrate newly acquired businesses. Data can be standardised and consolidated to your format. Processes can be streamlined and aligned to your existing standards. New staff can be absorbed into your team structure.

With the right technology platform, it’s easier to integrate newly acquired businesses.

This is all without ever worrying about server capacity, networking and hardware upgrades — the sort of features that make global cloud platforms such an obvious choice.

This brings me back to our new client, Invest Blue. CEO David Stephen sums it up perfectly: “cloud platform technology affords us a robust foundation to scale our business.”

Learn more about how PractiFI is helping Invest Blue in Financial Observer: http://www.financialobserver.com.au/articles/invest-blue-signs-up-to-practifi-platform

 

Technology is key to ethics and good governance in financial services

When parliament returns today there’ll be plenty of debate about business ethics, especially as it applies to banking and financial services.

The idea of a royal commission into the Australian banking and financial services sector has become a major election issue, with key players on both sides coming out loud and strong.

The Federal Government and the industry say we have a robust financial system overseen by two regulators that survived the GFC – so hands off! The opposition, the union movement and some consumer advocates say we need a royal commission, because financial institutions consistently fail to act in customers’ best interests.

When parliament returns today there’ll be plenty of debate about business ethics, especially as it applies to banking and financial services.

The recent Four Corners story on Comminsure gave a very human face to the latter narrative.

The issue extends well beyond parliament. Recognising that “there are examples of egregious and unacceptable behaviour in some organisations”, Australian Institute of Company Directors CEO (and former Financial Services Council CEO) John Brogden said that directors need to be “creating and nurturing the right culture” and setting the “right tone from the top”.

Brogden called for high level meetings with Treasury. But amongst all the talk of culture, tone and royal commissions, another crucial contributing factor is overlooked: technology.

Meetings, standards and worthy statements of intent are no match for giving your people the tools they need to provide an ethical customer experience.

Take the financial advice sector as an example. Most advisers I know put their customers first and don’t need another lecture on ethics. But too many are wedged between increasing customer expectations and old-school, poorly integrated technology.

There’s still way too much paper, and even where there are half-decent tools, they’re too hard to configure to the business’s real needs. The result? Inefficient processes that force advice teams to find shortcuts. And shortcuts and compliance don’t mix.

So what’s the answer? Invest in technology that empowers advice staff and delivers the transparency needed to create the right business environment.

Plus, old-school advice systems are too hard to integrate. If technology doesn’t show that the customer has, say, insufficient life insurance cover to match their risk profile, the adviser has to work so much harder to ensure their recommendations are in their client’s best interests.

The situation is even worse for management. Their tools for monitoring and supervising advisers are disconnected from the advice process, leaving them running audits and handling complaints well after mistakes are made. They just don’t have the technology to drive ethical financial advice proactively.

So what’s the answer? Invest in technology that empowers advice staff and delivers the transparency needed to create the right business environment.

First, every relevant piece of information needs to be immediately at hand so advisers and management can make the right decisions.

Second, systems need to constrain advisers to be compliant without compromising the flexibility they need to provide personal service and run a great business.

Third, management needs visibility. Compliance managers need ready access to advice-in-progress against the accreditation level of each adviser. They need reporting that indicates how much advice is being written in high-risk areas.

Finally, you need detailed audit tracking embedded into the system, not scribbled on pieces of paper somewhere. And that needs to be married to compliance information from other sources, whether it be client complaints, adviser audit results or remediation activities.

Getting these four dimensions right takes careful thought and some investment. But it’s so much more effective than yet another meeting with Treasury.

 

 

All the pieces don’t give you all the power

In a recent meeting with a superannuation fund CEO, the conversation turned to that greatest of challenges faced by all funds: creating genuine relationships with members.

His point was simple: most members are simply account holders, with no allegiance to the brand, no affinity for the values of the fund and no reason to see themselves as a part of something bigger.

The same can be said of life insurance policyholders.

For all of the data collected, a comprehensive understanding of the customer is still elusive; an almost mythical utopia that will forever remain out of reach. But why?

A comprehensive understanding of the customer is still elusive; an almost mythical utopia that will forever remain out of reach. But why?

The problem is impersonal, disconnected information.

Registry systems manage accounts, not people. In fact they often can’t tell if multiple accounts are owned by the same person, or just people with alike names. Similarly, policy admin systems manage policies, not people, and often have no idea that John Smith and Jonathan Smith are the same individual.

Throw a marketing system, a CRM and a finance system into the mix and the number of data siloes multiplies. Where’s the real customer amongst it all?

The big wealth firms tried to solve the problem with business intelligence. BI and data warehouses help, but they’re read-only, after the fact and not front and centre when customer interactions are happening.

The CEO in my story, however, is savvy. He’d already turned to the leading platform for running a genuinely customer-centric business: Salesforce. It’s the obvious choice if you’re serious about truly understanding your customer.

But the CEO’s experience with Salesforce left him confused. He knew that its capabilities are amazing, but he learned that it’s an incredibly rich toolkit that, out of the box, is in no way ready for use in his business.

The [fund] CEO’s experience with Salesforce left him confused. It’s an incredibly rich toolkit that, out of the box, is in no way ready for use in his business.

He likened it to buying LEGO. Sure, there’s a picture on the box of some amazing creations you might build. But how?

Salesforce is the best LEGO around, but to create the solution you need to run a superannuation fund, you need to know a lot. Not just about LEGO, but about superannuation.

The same is true for applying Salesforce to a life insurer, an advice practice or any wealth business.

We created PractiFI because we already knew the Salesforce toolkit and the detailed nuances of the wealth industry. We created a solution that brings together all the disconnected customer information across the business and makes it personal.

We created PractiFI because we knew Salesforce and wealth. We created a solution that brings together all the disconnected customer information and makes it personal.

Other great Salesforce partners have done the same in other verticals. Veeva crafted Salesforce for pharmaceutical; Propertybase for real estate; Jobscience for recruitment.

PractiFI reshapes Salesforce for wealth management.

I loved the moment when the savvy superannuation CEO realised that he could build genuinely rich member relationships without having to build something from scratch. It’s exactly what PractiFI is about.

Press Release: PractiFI & Omnium bring transparency to insurance advice

In a first for the Australian wealth sector, Omnium’s industry-leading life insurance research solution, OmniLife, has been integrated into the PractiFI platform as a fully branded tool.

“This is a game changer for the superannuation and advice industries”, PractiFI CEO Glenn Elliott said today.

“PractiFI is the only wealth platform that integrates best-of-breed industry tools as branded partners, not just white-labelled”, Elliott said.

“We’ve put OmniLife right there, front and centre for more advisers. It’s about choice.”

“Several large AMP advice practices, including PFG Financial Services, have already selected PractIFI to run their businesses.”

Omnium’s Trishanth Chandrahasan endorsed the PractiFI partnership.

“We’re really excited about integrating OmniLife with a truly forward thinking wealth management platform, and even more excited about what’s to come for this powerful collaboration”.

“Transparent partnerships like this offer genuine choice in wealth technology”, said PractiFI’s Glenn Elliott.

He added “I’m thrilled that we’ve been able to bring the OmniLife integration to market so quickly.”

 

About PractiFI 
PractiFI is the platform for running wealth businesses on Salesforce. PractiFI connects financial advice, superannuation/pensions, insurance, investments and lending onto Salesforce.

Media enquiries
Jeremy Goff
M: +61 411 477233
E: Jeremy@capital-e.com.au