Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Howlin’s Research IP to expand into NZ
Another investment platform is due to arrive in NZ within weeks under the ‘Flint Wealth’ brand. It is an equal partnership between Brisbane-based Research IP, run by well-known Australian advisory market identity Darren Howlin, and NZ’s Harbour Asset Management and Trustee Executors.
As was flagged by Howlin last December, Flint Wealth is primed to enter the increasingly crowded online investing space in NZ.
According to a Flint marketing document, the new business would eventually have two offers: Flint Wealth, a direct-to-consumer service à la InvestNow and Sharesies targeting “25-to-40-year-old emerging investors”; and, Flint Adviser, a pure technology play allowing advisory firms to ‘white label’ the investment administration custodial service.
The Flint front-end is based on technology developed by Research IP for the Taiwan Government-backed ‘FundRich’ platform. Flint also uses “scalable technology, backed by Trustee Executors’ custodial and administrative backoffice services”, the document says.
Former head of sales for Morningstar NZ, Stuart Auld, is on board as Flint head of client engagement. Ryan Bessemer, Trustee Executors’ chief executive, said Flint aimed to “soft launch” the direct-to-consumer platform in September with the advisor module expected to go live early next year.
“We’ll start with managed funds and term deposits and then add equities in the second phase,” Bessemer said. Flint had been working with a number of advisory groups over the last year to test the concept.
Trustee Executors recently re-signed with software provider Bravura for its backoffice via the latest Sonata system. Bessemer said Flint could also potentially tap into other Bravura technology such as the Midwinter Robo Advice service and other advisory systems the business currently offers in Europe.
Flint faces three platform competitors in the relatively small NZ advisory market led by FNZ and the MMC-owned Aegis with the NZX-owned Wealth Technologies slowly gaining a foothold (mostly in the stock broking sector). And on the direct-to-consumer side InvestNow and Sharesies have both carved out sizeable audiences; likewise, US equities specialists – Kiwi Wealth subsidiary, Hatch, and the Australian firm, Stake, have seen strong growth of late. In August, Sharesies also threw is hat into the US equities game.
However, the Flint document says the NZ investment platform market is “ripe for disruption” with feedback “from advisors and retail investors [indicating] that they are unhappy with the current options on the market…The financial advisory platform business “is currently dominated by legacy technology… often difficult to use. Newer retail investment platforms have a limited product range or are aimed at a youthful audience. Our research found that more than 70 per cent of potential investors between ages 30 and 50 were interested in investing online.”
Furthermore, the Flint document says platform fees “are unnecessarily high for light functionality and product access”. In addition to the Flint technology, platform clients would also have access to Research IP fund research along with a range of ‘content’ options including a “social media campaign driving traffic to selected fund”.
Howlin has a long association with NZ, first as general manager for Lonsec Fiscal, the big Australian institutional and wholesale (advisor led) research firm that includes Super Ratings, which dabbled briefly across the Tasman. SuperRatings still provides analyses for Kiwi Saver products.
Howlin later had a strategic relationship with the-then NZX-owned FundSource to provide qualitative research on NZ fund managers. Australia’s Zenith Investment Partners, which recently moved into the Australian institutional space with the purchase of Chant West, acquired FundSource late last year, ending the Research IP agreement.
*David Chaplin, editor of Investment News NZ, was assisted by Greg Bright in Australia
