Good afternoon all, There have been a few questions raised...

Good afternoon all,

There have been a few questions raised throughout this thread which I've responded to below in Q&A format:

• Would you say that Intiger is now a hot topic in the industry with recent developments, or do they still have a relatively quiet profile?

They still have a low profile. They are not well known in the industry just yet relative to the main players (IRESS, Rubik, Midwinter). Bear in mind, it seems they have a main footprint on the West Coast and less so on the East (despite servicing clients in 5 states). They also have not advertised their services publicly.

• Are you concerned with the impact on the industry if the labour government get in?

No, not really. Liberal or Labour, there won't be much of an impact directly to IAM. Business will go on. The main impact of a change in leadership will come through budget changes which mainly affect financial services companies themselves, rather than the technology platforms that underpin those businesses. If anything, any legislative changes to tax, super, retirement, SMSF etc would present opportunities for IAM to provide solutions to FP practices. On the downside, if Labour make any advser changes to small/medium sixed businesses or FinTech industry, then this could affect IAM directly, and certainly the practices that IAM service.

• We have already seen the attempted clamp down on up front commissions for advisers from limiting commissions to 80% up front or the emphasis of a fee for service model. I'm not sure that this is still going ahead? Perhaps you could shed some light or provide your thoughts.

Over time, I suspect commissions of all sorts will be completely eliminated (IMO) and most financial advice will become fee for service with some small grandfathering taking place. I'm not up to speed on the latest insurance conflicted rem policies and consultation papers, but will take a look when I get a chance. Either way, I don't think it will affect IAM that much, but with squeezing margins on smaller practices, this again, presents an opportunity for IAM.

• I'm interested in your real thoughts on off shoring process of the soa itself. I wonder if clients would get frustrated that the soa their adviser is charging them $2k for cost them a fraction of that price?

Good question. In my experience, any offshoring and outsourcing that makes its way into front page headlines gets a bad rap (example here), this usually bodes well for shareholders and the bottom line. specifically for SOA and any other back or middle office function being offshored, this is usually a non-issue for end customers because the business (FP practices) do not disclose this in detail and certainly don't advertise it to clients.

• I was under the impression the avg salary for a white collar worker to be 20k or less for a phillipines worker.  The 70k to 100k you mentioned is a base salary?

Yes, I chose roughly $25k, which is at the higher end because I prefer to be more conservative and also, Patrick C made a comment that their is an ethical issue here as well and would prefer to may fair (or above) wage, rather than give the public the perception of sweatshop conditions. Furthermore, I have a friend who works for a law firm that recently offshored back office functions to Philippines and estimated the cost to be around $25k. The $70k-$100k for Australian workers can be either net of gross of overheads and SG, payroll tax etc. For example, in some smaller FP practices, junior paraplanners and admin staff might get $50k + 20% oncosts, whilst a senior/experienced Paraplanner working for a large institution or successful boutique might get $95k + 20% oncosts. Therefore, the range is quite large and $70-$100k would be a good average for the purposes of modelling. Googling Salary Surveys for Paraplanners and Admin staff would yield similar results across the various states.

• Agree offshore is about quantity over quality. I am curious if the RG146 will help bring that ratio down to say 2 to 1, do you have any views on this?

Yes, I agree RG146 could bring that ratio down. That's not a bad thing if those more qualified RG146 staff add more value and are more productive than 3 staff that aren't RG146 qualified. It all comes down to what specific activities are being offshored.

• You mention MLC. Which Licensee are you referring to?  I don’t recall being mentioned. From your experience would dealerships likely have a say when it comes to off-shoring?

I mentioned MLC for the sole reason that Mark Rantall was head of Godrey Pembroke, so that would be an example of 1 licensee. Others would include NAB FP and Apogee. There is no evidence to suggest this, so it's pure speculation. Not sure which specific DGs would be pro/anti offshoring. The criteria for deciding would usually be based on their cost pressures and whether quality could be maintained as a result of offshoring. Possibly, a 3rd factor would be change management of the planners themselves (dare I say, aka. Generational bias).

• In your opinion, can you rank the level of difficulty of automating the different SOAs (factoring some human intervention will always be required)?
  

From easiest to hardest (very crude): Risk/Insurance (excl. business risk), investment only (regardless of SMSF or individual), establishing entities, contributions to super and UK pensions, rebalancing portfolios, rollovers/switches (pretty hard believe it or not), aged care, retirement income streams (some only) with optimisation, such as TTR. Unfortunately, it's not as straight forward when measuring difficulty as "Pensions" can be super easy, or super hard. Similarly, complexity for an offshoring business will come down to the quality and thoroughness of the information provided. There are also a bunch of other strategies I haven't listed (e.g. cash flow, debt, gearing, regular savings, portfolio management and other strategies that may only apply to HNW clients and deceased estates etc).

• If you are ok to share, in your role managing a para-planning team are you able to estimate the number of SOAs produced per annum (noting the team is only servicing bank planners)? Given insurance SOAs are automation ready, how many insurance SOAs were produced per annum by your old team?

Rough numbers of SOAs provided each year were 20,000. Insurance only would represent around 40% of that I think for bank/salaried planners.

• In its website, it lists the Insurance SOA as $19 to produce but there was a list of Pre-SOA services with different charges. In your opinion, are those services necessary to produce an automated SOA?
  

No, these services are not necessary to produce an SOA. However they are highly complementary (e.g. insurance) where IAM could be setting itself up to take ownership of the end to end process.

• Some other curly issues (and possibly opportunities) include the privacy laws for data in foreign countries - do the Australian laws apply in said location - can the data be sold to other parties for additional profit in that country?

Usually between onshore company and the offshore partner, there are strict policies, controls and contracts in place to protect privacy to ensure client data does not go outside the parties stipulated in the agreement. It would be highly questionable and commercially damaging is a company breached did this either illegally or without client consent.

• Network outage contingency - what happens when an undersea cable is cut or a disaster such as typhoon or flood occurs in India, Bangladesh upper Swaziland etc and available bandwidth and local infrastructure is impaired/destroyed?

Other than the devastating scenario that I would be able to connect to the internet and post on HC with your wonderful people, as the originator of this question aptly stated, BCP would kick in. "Good companies" (i.e. that have resources and good planning) will have Business Continuity Plans (BCP) in place. Cable cutting would effectively put a halt on any work that requires transmission between the onshore and offshore business and would most likely result in a significant backlog of work for IAM once systems and connectivity is restored. As for natural disasters, IAM would hopefully have BCP plans that enabled users to either more to an alternative location to work if feasible, otherwise, work would stop completely. In this situation, the onshore/Australian business would "try" to pick up the work, but usually struggles due to the following: they don't have capacity/resources, they are not trained (since they offshored this work), they could do part of the work but not to the same level of efficiency.

• Can i ask you or @SeeThru to do us a favor, by combing info from these posts on a xl spreadsheet (which i am not good at). This can be a useful future reference for new hc visitors to IAM forum.

Yes. I will do this, but it will be later once I have more concrete numbers from IAM to work with.

• My own question to myself - what are the risks/downside I see with IAM or is it all good news?

1. I have no idea how IAM plan to break into the larger insto's. They are relying in the early days on relationships and smaller practices. Beyond this threshold, they would need a super effective plan and strong relationships to break into the Big 4 and others. It will come down to openness of change management and politics. Alternatively they may take a "build it and they will come" approach.
2. Technology is becoming more a commodity (as offshoring already is). Without knowing Lilly and Klip, how replicable is their solution and how much competition will they face from new and existing entrants?
3. Key person risk. Stock standard risk with any start up.
4. Service lines and future complexity of their business: They have the ability to expand vertically (i.e. own the end to end insurance process from data gathering, SOA, application forms, underwritin, renewals etc) and they can expand horizontally (i.e. more into property, law, medical or anywhere else that is overburdened with administration tasks). Depending on which way IAM go, should be thought in strategic terms and not fall into the trap of making themselves too complex and grow too big too fast.

Q&A Over, Bodhi_Trader