Accessing Montgomery’s funds through a platform
During this most recent pull back in equity markets, we have received a number of calls from investors who have enquired as to what platforms Montgomery’s suite of funds are available on. Now many people may be asking what a “platform” is and what do they do.
In short an investment platform mainly serves the financial planning industry as it allows financial advisers to efficiently administer their many client investment portfolios in a cost and time efficient manner. I go into a bit more detail on the pros and cons of these offerings below, but for those that are interested you can view an up to date listing of our fund representation on the various platform menus here.
Readers would no doubt be familiar with some of these investment platforms as there are a number that are independently listed on the ASX, such as Netwealth (ASX:NWL), HUB24 (ASX:HUB) and Praemium (ASX:PPS). Furthermore, there are also platforms that are not listed as standalone businesses but are aligned to larger institutions you also would be familiar with, such as BT Panorama (Westpac), Macquarie Wrap (Macquarie) and Colonial FirstWrap (KKR but was formerly owned by CBA).
What are the benefits of using a wrap platform?
- Wider investment menu: A wrap platform allows investors to access a broader investment menu beyond what most traditional Industry, Retail and Corporate Super Funds will provide. These include your standard range of multi-asset strategies but with a variety of different managers offering these solutions (i.e. not just the Super Fund themselves and their internal investment team). They also tend to offer access to a diverse range of single sector strategies across a wide range of asset classes, cash solutions including term deposits and the ability to trade listed securities (mainly in the ASX 300 but sometimes also global shares). By way of example the Netwealth platform has over 300 managed funds available.
- Small to no investment minimums, no applications: Most platforms have the ability to set up an account for outside super monies or super monies. A big consideration when making the decision to setup a SMSF is the size of your super balance and whether you can access a variety of investment solutions based on their prescribed investment minimums directly. By way of example, the Montgomery strategies have a direct investment minimum which depending on the Fund starts from $25,000 but can be as high as $1,000,000 for our wholesale offerings. A platform in the super environment can pool their underlying investors’ assets together, so they can invest below the usual prescribed direct investment minimums. Also, once you have set up an account up there is no need to fill in an individual investment application each time you want to make a new or amend an existing investment via a wrap platform.
- Reporting: A pain point often for SMSF or individual clients who invest in unlisted strategies outside of trading platforms such as CommSec is that they will have to seek investment and tax reporting directly from the manager themselves on a standalone basis. Whilst there has been some great wealth portal innovations to help people get a holistic view of their assets (such as MyProsperity), there isn’t an easy way for a SMSF or individual to aggregate complete portfolio level reporting for direct unlisted managed funds, particularly if they have a number of them! A big advantage of the investment platform is their technology and ability to aggregate all the usual reports under the one application for one portfolio view. They achieve this by collating all the key data from the managers that are represented on the platform on your behalf.
Conversely, what are some of the negatives?
- Fees: For all the optionality a platform provides around ease of use, wider investments, and reporting there is a cost. This cost is generally represented as a tiered percentage based on the balance of your account and has an amount which the fees cap out at that varies platform to platform. This cost is of course on top of any fees associated with the investment strategies you choose via the platform or any other fees for trading and other services the platform provides. Like many service providers, some of the platforms have sweet spots around their pricing and can favour different investors depending on the size of their super (or investment) account and the number of accounts they wish to open (which can generally be family linked to reduce administration fees).
- Access and control: Not all of these platforms are open to the self-directed investor. In fact, many of these platforms must be accessed via a financial adviser. In my experience the only platform in the market that has most of the Montgomery funds (including Polen Capital offerings) and has a designated investor service for private, unadvised investors is Netwealth. Of course, other platforms may facilitate direct investment without a financial planner on a case by case basis.
- Not all platforms are created equal: The users experience from platform to platform can very significantly. Moreover, the newer entrants in the market have grounded their offering in more nimble technology and have innovated the platform experience to develop a user-friendly front-end application with tools and smarts to make the investment experience more seamless with functionality through online apps. The older incumbents whilst investing in their platform’s technology don’t have the same technological flexibility as the newer entrants to the market, often leaving them behind from a functionality perspective. It’s also worth noting, the owner of the investment platform decides upon the investment strategies being added to the available menu and some are more open than others.