How Macquarie is eating AMP's lunch

It's hard to think of an organisation that's been better at working out ways to profit from its competitors' blunders than Macquarie Group.

So it comes as little surprise that the Sydney-based investment bank has benefited as the beleaguered wealth management giant AMP suffered a hemorrhaging of funds from its platforms.

In the 12 months to March 2020, AMP suffered net funds outflows of just over $5 billion from its platforms. In contrast, Macquarie's platforms recorded net funds inflow of $2.8 billion.

Macquarie has subsequently disclosed that in the three months to June 2020, the funds invested on its platform jumped by 9 per cent to $86.6 billion.

Of course, Macquarie isn't the only player feasting at AMP's expense.

It is one of a handful of web-based specialist financial planning platforms that offer financial advisers a range of investment options that they simply can't access if they use older, more traditional platforms.

Indeed, three specialist platform providers, Macquarie, Netwealth, and Hub 24, have enjoyed a huge lift in market share at the expense of the traditional incumbents, such AMP.

There are several reasons for their success. In the first place, these new specialist platform providers haven't been hamstrung by old, legacy products.

What's more, because they've never had tied financial advisers who they could rely on to dutifully flog their products, they've had to develop products and technology that financial advisers actually like to use.

More recently, these more nimble competitors, including Macquarie, have benefited big time from the increasing fragmentation of the financial advisory industry.

In the wake of the Hayne royal commission, there's been a huge increase in the numbers of independent financial advisers.

In the past, most financial advisers were tied into big vertically integrated financial conglomerates. But independent boutique financial advisory practices have flourished as people have become increasingly distrustful of the conflicts of interest associated with the vertically integrated model.

This means that many financial advisers now find themselves in a position where, for the first time in their careers, they're able to choose what investment platform they use.

Not surprisingly, these smaller boutique advisers are choosing to use the most technologically advanced and sophisticated platforms that are available.

At the same time, the damage to the AMP brand has been so severe that industry players point out that even when their practices remain within the AMP orbit, financial planners are reducing their dependence on inhouse products.

After all, it's much easier for AMP-linked financial advisers to be able to convince their clients that they're acting in their best interests if they offer a suite of products and platforms, rather than simply offering up the single house option.

To increase the range of options available to their clients, and to demonstrate their independence, many financial advisers now routinely offer a couple of platforms.

Because Macquarie's platform boasts an open architecture, it means that whatever investment choice the adviser has made for the client, it can be accessed on the platform.

And, of course, the social distancing rules introduced as a result of the coronavirus pandemic have only accelerated the shift towards digital financial advice, as face-to-face advice became more difficult.

Rather than relying on their financial adviser to inform them of how the investments in their superannuation funds were performing, many people shifted to digital channels which allowed them to easily monitor their investments online.