YBR acquires brightday as part of their digital strategy

Yellow Brick Road (YBR) has acquired online advice platform brightday from News Corp.

The addition of brightday is the latest in a series of acquisitions for YBR.  While previous acquisitions have contributed to the business’ scale, this acquisition will provide an important capability for the company’s digital strategy the company says.

Executive Chairman Mark Bouris says Yellow Brick Road’s and brightday’s common partnership with OneVue, an independent investment software platform, allows for a logical and simple integration.

“This acquisition is a key part of our direct and online strategy to be launched to consumers in FY17,” Mr Bouris explained.

brightday serves a similar customer segment to Yellow Brick Road. Our 2020 customer strategy ensures we can serve customers via the means and channel they prefer: many will prefer face-to-face support which is why we will double our branch network by 2020, while others have a bias towards direct-digital product, and the majority will seek a blend of both. The acquisition of brightday helps enable this.”

Consistent investment in consumer-facing advertising over five years has built a strong brand which Yellow Brick Road intends to leverage in the digital space. Mr Bouris said that this brand awareness is already yielding direct inquiries from many customers for insurance, as well as some funds management and superannuation product.

“This digital push is focussed first and foremost on accelerating our wealth business growth. We want 30 per cent of our customers accessing our wealth services by 2020. Wealth is a real differentiator for us and a major focus over the next four years.”

“Giving customers superior digital access and tools for investments and superannuation is an important tactic in building our wealth volumes. We have already seen great engagement through Guru, our robo pre-advice tool. brightday is the next enhancement,” Mr Bouris concluded.

Yellow Brick Road says broker future bright as big four bank decreases branch numbers

Yellow Brick Road Holdings Limited says a recent report that ANZ is reducing its branch presence while bolstering its broker channels is another signal that brokers are the future of the mortgage industry.

CEO of Lending Tim Brown said Yellow Brick Road’s strategic vision to dramatically increase broker numbers is being reinforced by the actions of the big four bank and by the statistics around popularity of brokers with property purchasers.

The JP Morgan Australian Mortgage Industry report announced that ANZ has been steadily reducing its branch presence since 2011, in favour of increasing its broker usage. The report also highlighted that the broker channel may be perfectly placed to capture greater market share with 75 per cent of refinancers expected to use brokers.

“If we look to trends overseas, a move towards utilising brokers for a larger percentage of lending has already been happening for some time. In the UK, 76 per cent of loans are done through a broker and 87 per cent of the actual loans are through mutuals, building societies or regional banks. That same trend is now beginning here as banks realise old ways of operating aren’t working,” Mr Brown said

Mr Brown says there is no doubt that the traditional bank structure plays into the hands of intermediaries.

“In this day and age, people want to have access to service providers outside the typical 9-5 business day. Our brokers at Yellow Brick Road and Vow Financial don’t work limited business hours, they are driven to take care of the customer’s desire for convenience and that means being flexible with the time and place that suits the customer’s needs,” he said.

“Brokers also have a small business mentality that banks just can’t compete with. They are integrated into their communities in a way banks can only pretend to be. They work harder because that way they build a reputation and make more money. Running the bank’s capped income model is never going to be as popular with consumers long term as the alternative of a broker who is incentivised to give better service, work longer hours, bring more customers in and provide customer-centric service.”

Last year, the Deloitte-run industry roundtable found that more than 51% of mortgages written are going through a broker and also predicted further growth, with expectations of an increase to 60%.

In their recent strategy update, Yellow Brick Road Group said they had a goal of growing to 300 branded branches and 1,000 broker groups by 2020.

“Hearing that one of the big four is forgoing its branch presence in favour of a greater emphasis on the third-party broker channel reinforces the increasing consumer popularity and effectiveness of brokers,” Mr Brown concluded.

The Sacrosanct Branch?

Digital Finance Analytics is working on the next edition of our household channel survey analysis. The 2013 edition of “The Quiet Revolution”is still available meantime.

However, latest results from our surveys indicate that ever more households want to bank digitally. So, given the compelling data from our surveys, what has happened to the number of branches in Australia in recent years?  As branches are expensive, have outlets been closed in response to the digital migration?

Analysis from the APRA Point of Presence databases shows that the total number of branch outlets has grown slightly between 2013 and 2015. There were 5,478 outlets in 2013, 5,496 in 2014 and 5,480 in 2015. Overall almost no change.

Branch-2016-1Analysis of the count of branches by selected banks, which includes agency outlets, shows that most have reduced their footprints slightly, other than Bendigo/Adelaide Bank, who grew their footprint by 5.6% in 204-15.

Branch-2016-2On the other hand, Bank of Queensland has reduced the number of franchise branches and recorded a drop of 8.1% in 2014-15.

Branch-2016-3We conclude that so far banks are not responding to the digital revolution by closing branches, although some have reconfigured existing ones into smaller and more efficient units.

We segment households into three groups. Digital Luddites are the last bastions of traditional banking and centre on branch and ATM access, value face to face conversations, and the bank brand. They are migrating from PC’s to smart devices to access online bank services (if they use them).

In contrast, Digital Natives expect 24×7 access, mobile banking, near-field payments and online applications. They expect their bank to be in the social media environment, and would value video-conferencing with the bank advisor. Branch access, bank brand and face to face conversations are not important to this group.

Digital migrants are somewhere in between, however, more are demanding more from online services.

We think that existing players need to be thinking about how they will deploy appropriate services through digital channels, as their customers are rapidly migrating there.

We see this migration to digital is more advanced among higher income households. So players which are slow to catch the wave will be left with potentially less valuable customers longer term.

Here is a glimpse of our latest profitability index which shows how much less valuable Digital Luddites are compared with digitally aligned households.  There is a real risk of stranded costs in the branch network.

Bank-2016-4Players need to adapt more quickly to the digital world. We are past an omni-channel (let them choose a channel) strategy. Digital migration needs to become central strategy because the winners will be those with the technical capability, customer sense and flexibility to reinvent banking in the digital age.

The bank branch has limited life expectancy. Banks should be planning accordingly.

Strong Demand For Robo-Advice May Cannibalise Financial Advisors

Robo-Advice, the concept of using computer automation to provide tailored financial advice has been hitting the headlines recently. DFA has researched household demand for these digitally delivered services, and today we share some of the results.

By way of background, a robo-advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use human financial planners. Robo-advisors (or robo-advisers) use the same software as traditional advisors, but usually only offer portfolio management and do not get involved in more personal aspects of wealth management, such as taxes and retirement or estate planning. Robo-advisors are typically low-cost, have low account minimums, and attract younger investors who are more comfortable doing things online. The biggest difference is the distribution channel: previously, investors would have to go through a human financial advisor to get the kind of portfolio management services robo-advisors now offer, and those services would be bundled with additional services.

ASIC’s chairman Greg Medcraft says computer-generated financial advice, or “robo advice” could slash investment costs and eliminate conflicts of interest in the maligned financial planning industry.  They have established a “robo-advice taskforce”, which is investigating the suitability of potential entrants, who use computer algorithms to match investors with suitable assets at a lower cost than human advisers.

A number of Australian players are experimenting with different offers and solutions. For example, according to the AFR, Macquarie is creating a robo-advice platform that puts in one place more than 30,000 local and international investment choices. Unlike other robo-advice platforms, which are really vehicles for gaining funds under management and charging an asset management fee, Macquarie has opted for genuine portfolio advice that does not discriminate between particular fund managers or show any bias towards particular stocks or sectors.

Midwinter’s “Robo-Advice Survey” from 2015, which comprised of responses from over 288 advice professionals, representing over 65 licensees showed the majority of advisers (55%) surveyed were aware of Robo-Advice and not concerned about its potential to disrupt the advice industry, with 12% of these advisers actually excited about its arrival. Around a quarter of advisers were aware and concerned of the impact of Robo-Advice on their business. Only a small amount of advisers (5%) considered themselves apathetic towards the rise of Robo-Advice.

Fintech’s such as Decimal which was founded in 2006 by former Asgard senior executive Jan Kolbusz, provides new capability to the financial advice industry utilising the power and affordability of the cloud. Decimal has subsequently entered into an agreement with Aviva Corporation that saw the company listed on the ASX in April 2014 as Decimal Software Limited (DSX).

So turning to our analysis, DFA has been examining the prospective impact of Robo-Advice, from a household perspective using data from our household surveys. We have found that currently those who have received financial advice already, and who are most digitally aware would readily consider Robo-Advice services. Our conclusion is that rather than growing and extending advice to more Australian households, the first impact of Robo-Advice will be to cannibalise existing advisor relationships.

To start the analysis,we looked at overall estimated net worth by household segment. Those households with higher balances are more likely to have sought, or are seeking financial advice.  On average a quarter of households have at some time sought advice.

Net-Worth-By-AdvisorNext we looked at the technographic trends across our household segments using our digital segmentation, between those who are digital natives (always used digital), migrants (learning to use digital) and luddites (not willing or able to use digital). The chart below shows the relative distribution by segment across these three. The more affluent, and younger are most digitally aligned, and so are more likely to embrace Robo-Advice.

Technographic-SegmentsNext, we combine the data about getting financial advice and technographics. We find a greater proportion of households who are digitally aware have sought advice.

Technographic-Segments-AdvisorFinally, we asked in our surveys about households awareness and intention to consider Robo-Advice solutions if they were available. The results are shown below, with young affluent households, young growing families and exclusive professionals most likely to consider such a service. The proportions for each segment are those who would consider Robo-Advice, across all the digital segments.

Robo-Advice However, the analysis showed that those with existing advice relationships AND high digital alignment were most likely to consider Robo-Advice.  Those who are digitally aligned, but not seeking advice showed no propensity to use such a service – at this point in time.

So two observations, first there are many different potential offerings which should be constructed on a Robo-Advice basis, as the needs, of young affluent, and very different from say exclusive professionals. So effective segmentation of the offers will be essential, and different personas will need to be incorporated into the systems being developed.

Second, the bulk of the interest lays with those who have had advice, so it may not, in the short term grow the advice pie. Indeed there appears to be strong evidence that existing advisors may find their business being cannabalised as existing clients switch to Robo-Advice. This is especially true if the range of options are greater, and the price point lower.

We therefore question the assumption expressed within the industry that Robo-Advice is not a threat, as it will simply expand the pie to segments which today do not seek advice.  In fact, we suggest the clever play is to make it a tool, and aligned to Advisors, rather than a substitute for them.  In addition, the marketing/education strategies need to be developed carefully. There is a lot in play here.


Four in Five Retailers Say Mobile Is Having a Major Effect

Mobile’s importance is becoming undeniable according to eMarketer.

Mobile still accounts for a fairly small share of total retail sales, and, in many markets, even of digital retail sales. But retailers are feeling the impact of mobile devices.

In 2014, a little over half (57%) of retailers worldwide surveyed by payment solutions provider Payvision reported experiencing major growth in mcommerce sales. Among the total, 33% strongly agreed that growth was significant—already a sizeable share.

But by 2015 the evidence in favor of mcommerce was overwhelming. Nearly half of respondents were now in the “strongly agree” group, with an additional 34% agreeing more generally. Overall, 79% of retailers worldwide were undergoing major mcommerce growth this year.

More retailers around the world are getting into omnichannel as a result. This year, 91% of respondents said they offered customers the option to shop and pay across multiple devices. That was up from 84% last year.

Nearly three in four respondents reported this year that such an option had boosted sales via digital devices. In addition, 71% of retailers surveyed said they were focused on offering seamless shopping across multiple devices as well as offline sales channels.

eMarketer estimates that in 2015, US consumers bought $74.93 billion worth of goods and services via mobile devices, up 32.2% over 2014 spending levels. This year, mobile accounted for 22.0% of all retail ecommerce sales in the US, up 3 points since last year. It still made up a tiny portion of total retail sales, however, at just 1.6%.

In some other world markets, mcommerce is a bigger part of the picture. In South Korea, for example, mcommerce sales made up 46.0% of retail ecommerce sales and 5.1% of total retail sales this year, according to eMarketer estimates. In China, 49.7% of retail ecommerce sales and 7.9% of all retail sales occurred via mobile devices in 2015.

ANZ to launch new internet banking site

ANZ today announced a significant upgrade to its internet banking platform that will see it become the first major Australian bank to have a consistent user experience across desktop, tablet and mobile.

Launching this weekend, ANZ’s 2.1 million internet banking customers in Australia will be able to access the full suite of internet banking features from any device as well as improved security features.

ANZ Managing Director Products and Marketing, Matthew Boss said: “We know our customers are looking to do more of their banking via digital channels and we also know we need to continue to make banking as simple and secure as possible.”

“This upgrade complements our existing mobile banking application ANZ goMoney™ and allows customers to do more of their banking when and how they want with no instructions required.
“Given smartphones are expected to account for 90 per cent of all internet traffic by 2020, we’re pleased to be able to provide our customers with internet banking that is quick and simple to use on any device,” Mr Boss said.

Additional features of the Internet Banking upgrade include:

  • Ability for businesses to now approve payments on-the-go using mobile internet banking
  • Easy new menu navigation to help customers update contact details, pay a bill or open a new account
  • State-of-the-art visual design where accounts look like the actual card in the customers’ wallet.

ANZ has also strengthened the security of internet banking with the introduction of ANZ Shield, which authenticates transactions and activity using a one-time security code to allow customers to increase pay anyone limits or instantly reset their password.

ASIC Concerned About Broker Advertising

ASIC says Elite Mortgage Brokers, a Melbourne-based Chinese mortgage broking firm, has recently agreed to make changes to its website and print advertisements in response to concerns raised by ASIC.

ASIC was concerned that the following statements, which were made in Chinese, were misleading or deceptive or likely to mislead or deceive:

  • 100% success rate
  • pre-approvals within 15 minutes
  • Melbourne’s largest Chinese mortgage broker; and
  • matching of all banks’ interest rates.

The advertisements were made over the period October 2014 through to March 2015 in the Melbourne Property Weekly and on Elite Mortgage Brokers’ business website.

ASIC was concerned that statements claiming a ‘100% success rate’ were likely to be misleading because they suggest that credit will be provided to all applicants. Lenders or brokers that are subject to responsible lending obligations generally cannot claim that all applicants will receive credit – doing so is either non-compliant with the lending laws or otherwise misleading or deceptive.

ASIC was also concerned that the other statements made were likely to be misleading or deceptive, as Elite Mortgage Brokers could not properly substantiate the claims.

ASIC Deputy Chair Peter Kell said, ‘All representations made in advertising of credit-related products, including representations regarding the size of a business or the nature of services provided, must be accurate and able to be substantiated to avoid consumers being misled. This extends to ensuring consumers from non-English speaking backgrounds are not misled or deceived by advertising in a foreign language.

‘ASIC monitors all forms of advertising and will continue to monitor advertising targeted at non-English speaking consumers. Where necessary, ASIC will take enforcement action’, Mr Kell said.

APRA May Cease Point of Presence Statistics

APRA has released a discussion document on the future of the Points of Presence statistics which they currently produce. The data provides useful industry level information on channel behaviour and usage, and is highly relevant in the context of digital disruption and migration. The paper suggests modification of the reporting, or possibly a cessation. We believe the POP data is highly relevant and useful and attempts to stop reporting should be resisted.

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurers, friendly societies, and most of the superannuation industry. APRA collects a broad range of financial and risk data from regulated institutions as inputs to its supervisory assessments. Data collected from regulated and unregulated institutions also assist the Reserve Bank of Australia (RBA), the Australian Bureau of Statistics (ABS) and other financial sector agencies to perform their roles. APRA also collects some data to enable APRA to publish information about regulated institutions, and in other cases, to assist the Minister to formulate financial policy. Much of the data APRA collects are used for multiple purposes to reduce the burden of reporting.

APRA publishes as much of the data collected as are considered useful and as resources permit, subject to APRA’s confidentiality obligations with respect to individual institutions’ data. Publication of industry-level statistics enhances understanding of the industries regulated by APRA, aids public discussion on policy issues, and supports well-informed decision-making by regulated institutions, policy-makers, market analysts and researchers. Publication of institution-level data, where possible, is also consistent with promoting the understanding of the financial soundness of regulated institutions.

APRA observes international statistical standards in developing, producing and managing its statistics (except in the few cases where doing so would conflict with APRA’s primary role as a prudential regulator). By doing so, APRA helps protect commercially-sensitive information provided by institutions, whilst providing statistics that are useful and reliable, and that meet the needs of users.

APRA publishes detailed banking services provided within Australia by Authorised Deposit-taking Institutions (ADI) in its ADI Points of Presence (PoP) statistics. APRA is reviewing the PoP statistics to ensure that the statistics remain relevant and useful.

This paper focuses on two options for the future of the PoP statistics and data collection:
1. streamline the PoP statistics and data collection; or
2. cease the PoP statistics and data collection.

APRA is seeking feedback on the proposed changes. Written submissions should be forwarded by 18 November 2015, preferably by email to:
Manager, Banking Statistics,
Australian Prudential Regulation Authority
GPO Box 9836
Sydney NSW 2001
Email: statistics@apra.gov.au

NAB to offer “Robo-Advice”

According to Money Management,

NAB has become the first of the ‘big four’ banks to announce a digital advice offering, stating that 40,000 selected customers would be given free access to the service via the bank’s internet banking service, with an expectation of providing the service to its 3 million customers in due course.​

The service, named NAB Prosper, has been labelled as digital advice with the bank distinguishing it from robo-advice by stating the advice would be personalised and tailored to its customers via a range of specific questions relating to their current financial situation and future goals.

The service would also be distinguished from robo-advice in that it would not provide transaction services nor would it direct people to purchase any product.

Rather the service would provide an up to date view of a customer’s financial position and provide a range of broad advice options based around risk profiling and financial modelling with customers directed to personalised advice if they require it.

The initial phase of the service will provide advice on super and insurance and will be available from early October and will eventually expand to cover debt, cash flow, investments and estate planning in 2016.

NAB executive general manager – wealth advice, Greg Miller, said NAB Prosper was designed to provide advice to the 80 per cent of people who did not have an ongoing relationship with a financial adviser and would complement the face to face advice process.

“The personal relationship between a consumer and an adviser is crucial, and we know this relationship will continue to be a fundamental part of the advice process,” he said.

“Allowing people to see their current financial situation has the ability to trigger a conversation with an adviser. With only one in five Australians currently seeking financial advice, this can only be a good thing for customers and the industry more broadly.

“Advisers benefit from this by being able to capitalise on changing customer segments and deliver targeted, relevant advice, simply and efficiently. It supports growth, strengthens capabilities and will improve efficiencies across our network.”

Miller said the move to provide digital advice was driven by changing consumer needs and behaviours and the advice sector was not immune but would continue to play a role dealing with major and important events and decisions for clients.

“The shape of the advice industry is changing and it will be largely driven by consumers, whose needs are evolving. Different consumers want to access financial advice in different ways, and we need to adapt our offering so consumers can choose when, where and how they deal with us,” he said.

“We’re continuing to look at ways to evolve our business to meet these changing needs. This evolution will continue to include advisers for those life-stage events where a customer wants to sit down and have a face-to-face discussion with their adviser.”

Aussies using only their Mobile or Tablet to bank triples in 3 years

According to Roy Morgan, an estimated 1.1 million (5.8% of) Australians use only their mobile phone or tablet to conduct banking activities in an average 4 week period. In three years, the number of Australians doing “mobile-only banking” has tripled. This means they do not use any other banking channel, such as website, branches, adviser/banker or the telephone, to deal with their bank. This chimes with earlier DFA research on channel preferences, where we showed that specific segments lead the way into digital usage.

By June 2015, 33% of Australians conducted internet banking using a mobile phone or tablet (app) in an average four week period. This has resulted in a group of people that only deal with their banks via a mobile or tablet. As assumed, younger generations take up digital channels at higher rates than older ones, with close to one out of ten people under 34 years old doing ”mobile-only banking”.

% who only conduct banking via a mobile phone or tablet in 4 week period

Aussies using only their Mobile or Tablet to bank triples in 3 years