Giving advisers free rein over the software they use will prove to be a licensee’s Achilles heel, says Todd Kardash, chief executive officer of Matrix Planning Solutions, the 2019 CoreData Licensee of the Year.

Kardash says a solid and consistent technology platform across an advice network will be a critical success factor for licensees and he says it defies belief that so many continue to let advisers use whatever software they want.

“[It] is a dangerous place to play because licensees have to have visibility and they have to be able to supervise and monitor right across their network,” Kardash says.

“It will be their Achilles heel going forward. In fact, I predict within 18 months, most licensees will mandate a software solution for their advisers. You can’t have visibility [of advice being provided]. The only way you can have visibility is physical, face-to-face audits. And I think the regulator will take a fairly dim view of licensees allowing advisers to have any software program.”

“For licensees not to have an in-house technology team, where they’re
supporting the advisers through that technology play, staggers me”

Todd Kardash

Kardash says he is “amazed that most licensees today have not got an in-house technology team” to support advisers through the implementation of technology to support the advice process.

“For licensees not to have an in-house technology team, where they’re supporting the advisers through that technology play, staggers me,” he says. He says that while Matrix has an in-house team, it’s rare to find one in other licensees outside AMP and the big banks, and “they seem to be shedding themselves of their licensees at the moment”.

Kardash says successful licensees will have to excel in two key areas: technology supporting delivery of advice; and compliance and risk management.

“Those two areas of compliance and technology are going to be it,” he says.

“We’re fortunate in a sense that [Matrix head of advice] Tanya Seale has a technology degree and happened to fall into the compliance world many years ago. So we have a two-in-one who’s able to provide a system that if you follow the bouncing ball through the technology platform you come out with a compliant document. Advisers get great certainty around the fact if they follow the bouncing ball they’re following the Best Interests Duty.”

IT benefit outweighs the cost

Kardash says the cost of funding in-house IT resources is significant but outweighed by a reduced likelihood of running foul of the regulator over non-compliant advice.

“You offset that [cost] very, very quickly with not getting an enforceable undertaking or directions from the regulator,” he says.

“These days, [for] licensees that end up with an enforceable undertaking [it] is probably the death knell; it’s probably the first step to the end. With subsidisation gone, platform rebates gone, licensees need to be able to stand on their own two feet. They need to be profitable in their own right, and to do that you have to make sure you’ve got the right technology play.”

The removal of subsidies means that advisers inevitably will pay more for licensee services, and in turn the cost of advice to consumers will rise, Kardash says.

“We’ve seen that over the past eight months, the rise in the cost of advice,” he says.

“Our industry has been subsidised forever and a day by manufacturers.
The day of reckoning is now. We’re going to see the true cost of advice”

Todd Kardash

“Licensee fees, right across the board, have gone up significantly and we’ll continue to see that over the next 12 months. Any adviser who is thinking their licensee fee shouldn’t go up, they’re probably living in the dark ages. As subsidisation goes, whether it’s from rebates or manufacturers or whatever it is, the cost of advice goes up.

“Our industry has been subsidised forever and a day by manufacturers. The day of reckoning is now. We’re going to see the true cost of advice. The manufacturer is not paying, now, the consumer will now pay the appropriate [price] for advice.”

Matrix was named CoreData Institutionally Affiliated Licensee of the Year and CoreData Licensee of the Year in July, picking up top honors for the third year in a row. Kardash says the value of some awards has been diminished by the sheer number of awards on offer.

“You can almost win an award for a anything these days,” he says.

“But that being said, this is a particularly good award to win because it’s actually voted by advisers themselves. And advisers can be fairly brutal in the way they assess their licensees. We think it’s a bit of a feather in the cap that we’ve been able to win it for three years in a row.”