Platform Sector Review – February 2021

Authors: Andrew Ash – Senior Manager, Erik Siswandi – Associate Analyst

Peer Reviewer: Alex Harris – Senior Analyst

Preface The IOOF Research team (Research) completes a detailed annual review of each platform available on the Approved Product List (APL) to ensure that all approved platforms are of a standard that supports the delivery of high-quality advice. Sector reviews allow Research to undertake rigorous investigation into the quality of offering from each platform provider. Additionally, the review affords Research the opportunity to evaluate the construction of the APL, so as to ensure that advisers have access to an adequate range of platforms in order to meet the needs of different client segments.

Scope The scope of this sector review is limited to Platforms. Platforms is a catch all term for administration and custodial platforms that enable clients to hold a range of investments in one location. Platforms typically offer benefits for clients in terms of a large range of investment choice, online visibility and access, reporting, and the convenience of having everything in one location. For financial advisers, the benefits are similar in terms of having a large range of investment options available from which to construct portfolios to meet their clients’ needs, all in one central location that facilitates high quality service and reporting. Platforms can largely be divided between retail Master Trusts and Wraps. Master trusts typically only offer managed fund investments with all fees bundled into the Indirect Cost Ratio (ICR) of the individual funds. These funds are held by the trustee on behalf of the investor. Wrap platforms on the other hand typically have a far broader investment menu including listed securities and term deposits. Fees are distinct and separate between the platform and the underlying investments. Finally, clients are the beneficial owner of any investments held. Platform providers typically offer both Super and non-Super versions of their platform to cater for the different monies invested inside and outside Super. Industry and Public Sector Super Funds, and SMSF Administrators do not form part of this Platform sector review. They are covered as their own distinct sectors as they require a different due diligence process and approach. We note that platforms are sometimes white-labelled for commercial purposes and can appear like different products. These badged products are essentially identical to the underlying product, but sometimes have differentiated pricing. As such, for the purposes of the APL, as long as the underlying platform is reviewed and rated by Research, and the differentiated pricing arrangements are viewed as reasonable, we accept the rating as transferrable to the white-labelled product.

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Table of Contents

1.0 Executive Summary .................................................................................................................................................... 3 2.0 Platform Market Overview ......................................................................................................................................... 3 3.0 Sector Themes .............................................................................................................................................................. 4 4.0 Objectives of the Annual Sector Review ............................................................................................................... 5 5.0 Sector Review process and methodology............................................................................................................. 5 6.0 Sector Review Outcomes - Capability, Ratings, and Flows ............................................................................ 6 7.0 Platform Rating Changes ......................................................................................................................................... 11 8.0 Summary ...................................................................................................................................................................... 12

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1.0 Executive Summary

Following the completion of this sector review, we believe our licensee APLs contain a high quality and diverse range of platforms which allows advisers to service their clients across a broad range of needs and objectives. Our review only considered existing platforms on the APL as per business requirements. At present we are also reviewing Rhythm, an IOOF white label offering of the Hub24 platform. Once all details of this new platform have been finalised we will finalise our review

Last sector review we placed a number of older, legacy style platforms on hold. This reflected their status as being acceptable platforms for existing clients, should it make sense for the client to retain their investments via that platform, while at the same time being platforms that new clients should not typically be accessing. Our broad range of newer platforms that are cheaper and/or on better technology are more appropriate for existing clients.

The outcomes of this year’s review is largely one of maintaining the status quo, given we believe that the ratings for most platforms remain appropriate. There are some ratings changes that represent a status or classification change. We have also placed AMP platforms on an Approved (watch) rating.

Please refer to your licensee APL to confirm which platforms are approved for your use.

2.0 Platform Market Overview

The Platform market has gone through a period of substantial change, albeit some of the trends have stabilised somewhat over the past 12 months. The large outflows from platforms to Industry Super funds off the back of the Royal Commission appears to have slowed, while most major platforms have reduced fees. Improvements and investment in technology, as well as the breaking down of the vertically integrated model that has dominated the industry for a couple of decades, continue to be key trends. Section 3 will explore some of these themes in a bit more detail, but the net effect has been a year of slight recovery and positive net flows, albeit lower overall FUM given market volatility. See below for a further breakdown of these numbers –

Source: Plan For Life, ‘Analysis of Wrap, Platform and Master Trust Managed Funds, 22 December 2020

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Source: Plan For Life, ‘Analysis of Wrap, Platform and Master Trust Managed Funds, 22 December 2020

3.0 Sector Themes

3.1 Ongoing divestment The end of the vertically integrated wealth model for the major banks, which was driven and/or accelerated by the Royal Commission, has resulted in all of the major bank platforms being divested or currently for sale. Since the last Sector Review we have seen the sale of the CFS platforms to KKR and the sale of the MLC platforms to IOOF. The BT platforms as well as the AMP platforms are all under consideration for sale as well. Depending on the outcomes for BT and AMP, the platform market will soon likely consist of IOOF, some overseas interests such as KKR, and the newer independent platform providers such as Netwealth, Hub24, and Praemium.

3.2 Pricing stabilisation 2018 saw the beginning of major price reductions across the platform market, as BT moved to significantly reduce prices, and as scrutiny on retail fees increased off the back of the Royal Commission and Productivity Commission which in turn increased public pressure in this space. In the last 12 months this trend has seemingly stabilised, as most major platforms have reached a pricing point that is competitive and/or better in some cases than comparable Industry Fund offers. There is further detail in this document on specific pricing, but as a rule of thumb, total product cost across the platform and an investment solution of 1% p.a. or less is achievable with most platforms.

3.3 Significant spend on technology In recent years there has been a significant increase in spending on the capabilities of many of the major platforms, as they have tried to move from administration systems that were historically quite manual and paper based, to being platforms that better align with consumer expectations around the digital experience, and efficient interfaces and processes. One of the key focuses last year, given the pandemic and people’s inability to meet face to face, was a platform’s digital, online capability, in particular

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their ability to accept digital signatures on documentation and processes where previously a wet signature may have been required. We cover this functionality by platform further below in this document.

3.4 Managed Accounts become commonplace

Managed Account functionality on the major platforms has now become the norm with all the major platform providers offering managed accounts. From an advice licensee’s perspective this trend has been driven by the ability to build client segment relevant portfolios, that are professionally managed and efficient to implement. Furthermore, this can be done with relatively small scale and often minimal upfront investment. All our major platform providers offer managed account functionality. Managed Account FUM is now in excess of $80 billion across the industry.

4.0 Objectives of the Annual Sector Review The objective of the Review is to ensure that we maintain a rigorous and consistent approach with regards due diligence on our Platform APL, which in turn ensures that any approved platforms are of a standard that supports the delivery of high-quality advice. The key areas of focus for this review are: 1. Quality: Ensuring that any platform on the IOOF APL is a high quality offering that meets key criteria 2. Clear segmentation & suitability: Ensuring that the platforms on the APL align with the needs and objectives of the group’s key client segments 3. Disciplined management: Ensuring that the APL for platforms is a high-quality list, as opposed to simply being a broad list. This focus on quality supports better client outcomes, advisers’ ability to know their product, and Research’s ability to provide greater value to advisers and clients. This focus on quality nevertheless needs to be considered in conjunction with the need for choice and coverage that supports adviser best interest obligations.

5.0 Sector Review process and methodology The process commenced with a Request for Information (RFI) document that was sent out to platform providers that requested them to answer questions and queries as it relates to their company, financial strength, platform technology and features, pricing, and flows. Having received these responses there have been subsequent follow-up questions, conversations, and meetings with various platforms as appropriate. Each response and subsequent follow up has then been distilled down to a matrix of key factors for consideration and include –

- Company strength & risk management - Company focus on platforms as a key business - Platform quality and features - Pricing - Independent research score (ChantWest or SuperRatings) - Platform overall FUM/FUM with our Licensees - Platform Flows/Flows with our Licensees

This combination of factors gives us a strong view not only on the quality of the platform offering, but also its long term sustainability in a challenging market. For the subjective areas of this matrix, such a Platform features and quality, we have conducted a peer relative scoring exercise, with scores as follows –

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0 to 2.25 – Poor: Significant problems and challenges and well below peers 2.25 to 2.75 – Average: Few competitive advantages or features 3 to 3.75 – Good: Well-regarded and has some competitive advantages and features over peers 4 to 5 – Excellent: Highly regarded with strong advantages and features over peers These scores help inform the final rating of the platform. As per the Related Entities policy, we have not provided scores for the platforms where IOOF has an economic interest. We have instead looked focused primarily on the Independent Research score available.

6.0 Sector Review Outcomes - Capability, Ratings, and Flows

The following table is a summary of the scoring and other key considerations the Master APL for platforms

Non-related entity platforms

Product Master Trust/ Wrap

Organisation Strength

Platform Quality

APL Rating Description

AMP Custom Super MT 2.5 3 Hold Corporate Super

AMP Flexible Lifetime Super

MT 2.5 3 Approved (Closed)

Legacy master trust, only open to delinks from CustomSuper

AMP Flexible Super MT 2.5 3 Approved Contemporary MT product

AMP Generations Wrap 2.5 3 Hold Legacy platform, mini wrap

AMP MyNorth Wrap 2.5 3.75 Approved Contemporary platform, full feature

AMP North Wrap 2.5 3.5 Approved (Closed

Legacy platform

AMP Signature Super MT 2.5 3.5 Approved Contemporary Corporate Super

AMP Summit MT 2.5 3.5 Approved Legacy platform

AMP Super Directions MT 2.5 2.5 Hold Legacy Corporate Super

Asgard Allocated Pension Account

MT 4 2.5 Hold Income stream

Asgard Elements MT 4 3 Approved Basic MT

Asgard Employee Superannuation Account

MT 4 3 Approved Corporate Super

Asgard eWrap Wrap 4 3.75 Approved Contemporary platform

Asgard Infinity eWrap Wrap 4 3.75 Approved Contemporary platform

Asgard Superannuation Account

MT 4 3.75 Approved Contemporary MT product

Asgard Term Allocated Pension Account

MT 4 2.5 Hold Legacy product

Asgard Trustee Funds Account

MT 4 2.5 Hold Legacy product

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BT Lifetime Employer Super

MT 4 3.75 Approved BT corporate MT

BT Lifetime Super MT 4 3.75 Approved (Closed)

Closed BT retail MT

BT Panorama Wrap 4 4.25 Approved Contemporary platform

BT Wrap Wrap 4

3.75

Approved BT wrap offering, transitioning to Panorama

CFS Employer Super MT 4 3.75 Approved CFS corporate MT

CFS FirstChoice MT 4 3.75 Approved CFS retail MT

CFS FirstWrap Plus Wrap 4 3.5 Approved CFS full-service wrap

Macquarie Investment Accumulator

Wrap 4.5 3.5 Approved Legacy MT

Macquarie Investment Consolidator (Series 1)

Wrap 4.5 3.5 Approved (Closed)

Legacy wrap platform

Macquarie Investment Consolidator (Series 2)

Wrap 4.5 4 Approved Contemporary wrap platform

Macquarie Investment Manager (Series 1)

Wrap 4.5 3.5 Approved (Closed)

Legacy wrap platform

Macquarie Investment Manager (Series 2)

Wrap 4.5 4 Approved Contemporary wrap platform

Macquarie Super and Pension Consolidator (Series 1)

Wrap 4.5 3.5 Approved (Closed)

Legacy wrap platform

Macquarie Super and Pension Consolidator (Series 2)

Wrap 4.5 4 Approved Contemporary wrap platform

Macquarie Super and Pension Manager (Series 1)

Wrap 4.5 3.5 Approved (Closed)

Legacy wrap platform

Macquarie Super and Pension Manager (Series 2)

Wrap 4.5 4 Approved Contemporary wrap platform

Macquarie Super Options

MT 4.5 3 Hold Legacy MT

MLC MasterKey Business Super

MT 4 3.5 Approved MLC corporate MT

MLC MasterKey Investment Service

MT 4 3.5 Approved (Closed)

MLC legacy MT

MLC Masterkey Investment Service Fundamentals

MT 4 3.75 Approved MLC contemporary MT

MLC Masterkey Super and Pension Fundamentals

MT 4 3.75 Approved MLC contemporary MT

MLC MasterKey Unit Trust

MT 4 2.5 Hold Legacy ML investment platform

MLC Navigator Investment and Retirement Plan (Series 1)

Wrap 4 3.5 Hold Legacy full-service wrap

MLC Navigator Series 2 Wrap 4 4 Approved Contemporary full-service wrap

MLC Wrap (Series 1) Wrap 4 3.5 Approved (Closed)

Legacy full-service wrap

MLC Wrap (Series 2) Wrap 4 4 Approved Contemporary full-service wrap

Perpetual WealthFocus

MT

4

2.5

Hold Perpetual's MT product

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Related Entity Platforms

Product MT/Wrap APL Rating SuperRatings

rating

Chant West Apple rating

Description

Bendigo Smartstart Wrap Approved* N/A 4 Bendigo/Sandhurst baby wrap

Grow Wrap Wrap Approved* N/A 4 OnePath Wrap (Macquarie)

Integra Super MT Hold * Silver OnePath Retail MT

IOOF Employer Super MT Approved* Gold 4 IOOF corporate

IOOF Essential* Wrap Approved* N/A N/A IOOF baby wrap

IOOF eXpand* Wrap Approved* N/A N/A IOOF Wrap

IOOF Portfolio Service Wrap Hold* Silver IOOF legacy wrap

IOOF Pursuit Core Wrap Hold* Gold 3 IOOF legacy wrap

IOOF Pursuit Focus Wrap Approved* Gold 4 IOOF Baby Wrap

IOOF Pursuit Select Wrap Approved* Gold 4 IOOF Wrap

OnePath OneAnswer (EF/NEF/DEF) MT Hold* Silver OnePath retail MT

OnePath OneAnswer Frontier MT Approved* Gold 4 OnePath retail MT

Voyage Wrap Wrap

Hold* n/a n/a OnePath wrap

Wealthtrac Portfolio Services Wrap Hold* n/a n/a OnePath wrap

Wealthtrac Superannuation Plan Wrap Hold* n/a n/a OnePath wrap

*Independent ratings process via Chant West is currently being completed. Independent ratings for IOOF Pursuit have been relied upon for eXpand and Essential

until this point/

Praemium Customised Portfolio Service SMA

Wrap 4 4.5 Approved Contemporary full-service wrap

Zurich Superannuation MT 4 2.5 Hold Zurich’s MT product

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Key platform features Summary (does not include related entity platforms) The focus of this table are those capabilities and features that support an efficient, digital, and relevant adviser and client experience in 2021

Product

Straight through

Application process

Docusign and similar capabilities

Managed Accounts

Strength of Adviser & Client Portal*

Strong Analytics

Tools

ESG features and tools

for adviser and clients

AMP Flexible Super ✓ ✓ ✓

AMP MyNorth ✓ ✓ ✓ ✓✓ ✓ ✓

Asgard Infinity eWrap ✓ ✓ ✓

Asgard Superannuation Account ✓ ✓ ✓

BT Panorama ✓ ✓ ✓ ✓✓ ✓ ✓

BT Wrap

CFS Employer Super ✓ ✓ ✓

CFS FirstChoice ✓ ✓ ✓ ✓ ✓

CFS FirstWrap Plus ✓ ✓ ✓ ✓ Macquarie Investment Accumulator ✓ ✓ ✓✓

Macquarie Consolidator (Series 2) ✓ ✓ ✓ ✓✓ ✓ ✓

Macquarie Manager (Series 2) ✓ ✓ ✓ ✓✓ ✓ ✓

MLC Masterkey Fundamentals ✓ ✓ ✓ ✓

MLC Navigator Series 2 ✓ ✓ ✓ ✓ ✓ ✓

MLC Wrap (Series 2) ✓ ✓ ✓ ✓ ✓ ✓ Praemium Customised Portfolio Service SMA ✓ ✓ ✓ ✓✓ ✓ ✓

*One tick denotes standard quality portal, while two ticks denotes excellent portal Note: a blank space indicates that no specific response was provided in the RFI or in subsequent follow-ups

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Pricing Comparison See below for a guide to pricing on different balances for the platforms. Please note as this should be taken as a guide only. Platform pricing can vary across badges. Investment selection as well as things like fee aggregation for partners can change these prices. The below pricing assumes an investment in a 70/30 multi-asset index option so as to show as consistent a comparison possible

1. Full-Service Wrap total cost (% p.a.) for a single client investing in a 70/30 index option

2. Baby Wrap total cost (% p.a.) for a single client investing in a 70/30 index option

3. Master Trust Pricing (% p.a.) for a single client investing in a 70/30 index option

Summary View

Across this broad range of platforms there is a wide range of choice and features that may suit differing client segments. There

were however, two platforms that stood out through this process and they are Praemium and Macquarie. While other platforms

have some real strengths, they also typically have an area of concern or weakness at present. With Praemium and Macquarie, you

have two platform providers that are strong and focused at an organisational level, whose platform offerings are high quality

technology-led solutions, at competitive prices, and with good service levels to match.

BalanceAMP MyNorth

Super

Asgard eWRAP

Super Account

Asgard Infinity

Full

BT Panorama

Super FullCFS FirstWrap

Grow Wrap

Super IOOF eXpand

Macquarie

Super

Consolidator II -

Elevate

Macquarie

Super Manager

II

MLC Wrap

Super Series 2 -

Full

Praemium

$200K 0.74 1.26 0.9 0.83 0.77 0.56 0.84 0.85 0.51 1.24 0.73

$500K 0.63 1 0.88 0.64 0.67 0.56 0.62 0.66 0.44 1.08 0.63

$800K 0.57 0.9 0.85 0.59 0.59 0.55 0.51 0.56 0.42 1 0.56

BalanceAsgard Infinity

Core

BT Panorama

Super CompactIOOF Essential

Macquarie Super

Consolidator II -

Engage

Macquarie Super

Manager II

MLC Wrap Super

Series 2 - Core

$200K 0.7 0.66 0.64 0.28 0.51 0.44

$500K 0.68 0.57 0.62 0.2 0.44 0.35

$800K 0.65 0.55 0.61 0.18 0.42 0.33

BalanceAMP Signature

Super Personal

Asgard Elements

Super Account

CFS FirstChoice

Wholesale

Personal Super

MLC MasterKey

Super

Fundamentals

OnePath

OneAnswer

Frontier Super

$200K 1.17 1.18 0.33 0.58 0.8

$500K 1.14 1.16 0.31 0.49 0.8

$800K 1.13 1.16 0.29 0.47 0.78

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7.0 Platform Rating Changes

PLATFORM DOWNGRADES

Platform Distributor Wrap/MasterTrust (MT)

Previous Rating Current Rating

AMP Super Directions AMP MT Hold Remove

M3 EmPlus AMG Super MT Hold Remove

FSP Prestige Plus IOOF Wrap Hold* Remove

FSP Super IOOF Wrap Hold* Remove

Portfolio One IOOF Wrap Hold* Remove

AMP Flexible Super AMP MT Approved Approved (Watch)

AMP MyNorth AMP Wrap Approved Approved (Watch)

AMP Signature Super AMP MT Approved Approved (Watch)

AMP Summit AMP MT Approved Approved (Watch)

AMP Super Directions was a legacy super product which has now been transferred into AMP Custom Super.

M3 EmPlus is managed by AMG Super and we were informed that the product will be merged with their AMG Super core offering on 20th February 2021.

FSP Prestige Plus and FSP super – As part of a consolidation of older/legacy type IOOF platforms the two FSP platforms were closed and client funds were moved into the Voyage platform.

Portfolio One - As part of a consolidation of older/legacy type IOOF platforms the two FSP platforms were closed and client funds were moved into the Voyage platform

AMP Platforms on Watch - Given a combination of factors we believe it appropriate to place the Approved AMP platforms on a Watch rating. At this stage we have no concerns around the platform functionality and their baseline ability to service advisers and clients. There are however, broader concerns. The first is AMP itself and the level of uncertainty about its future and what may or may not be sold off to other parties. They are in the process of actively trying to sell all or parts of the business, and appear at present to be struggling to attract enough interested parties. As this process drags out, they also continue to lose FUM from their valuable asset management business with significant mandates having been pulled. On the platform side AMP is in outflow as well. Added to this is a mooted rationalisation of their platform business, which would makes sense given their range of platforms, but is being considered in a very uncertain environment. Accordingly, we believe a Watch rating is appropriate for the time being. Since the approval of this rating change AMP have announced a non-binding JV deal with US fund manager Ares for the AMP Capital private markets business. We will still maintain the Watch rating given the ongoing uncertainty, particularly as it relates to the AMP Wealth business.

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RELATED ENTITY STATUS CHANGE

Platform Previous Distributor

Current Distributor Wrap/MasterTrust (MT)

Previous Rating Current Rating

AcuityPortfolio Service

IOOF BT Wrap Approved

(closed)*

Approved

(Closed)

Asset Administrator IOOF BT Wrap Approved* Approved

FinHq IOOF BT Wrap Approved* Approved

Foundation eWrap IOOF Asgard Wrap Approved* Approved

Insignia IOOF BT Wrap Approved* Approved

Snowball eWrap IOOF Asgard Wrap Approved* Approved

These platforms have all sat within the IOOF group as white labels of BT platforms. Now, however, all been moved back to BT, post the changes to IOOF and BT’s platform arrangements, which has seen IOOF looking to develop and offering withHub24. There is now no further financial interest in these platforms, and it is therefore appropriate to remove the related entity asterisk from these platforms.

8.0 Summary This sector review has taken into account the broad range of platforms already on the APL. With the continued technological investment and enhancements across this range of platforms, we believe it can cater to a wide array of adviser and client needs that are relevant in 2021 and beyond. Furthermore, with the competitive pricing across a number of platforms, clients are able to access genuinely cost effective investment and super solutions that are as cheap, if not cheaper then other options in the market including Industry Funds and SMSF offerings.

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Important Information This report is prepared by the IOOF Research team for: Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837, Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323, Godfrey Pembroke Group Pty Ltd ABN 38 078 629 973 AFSL 245451 and IOOF Alliances Pty Limited ABN 12 103 365 091 (‘Advice Licensees’). This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of the Advice Licensees. Declaration of interests: The Advice Licensees and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage or other fees from, any securities or other financial products referred to in this report, or may provide services to, do business with or seek to do business with the company referred to in this report. The Advice Licensees and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that The Advice Licensees or its associates may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. A list of material interests of The Advice Licensees and its associates, and product issuers referred to in our research reports, can be found on the following IOOF website link http://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process The information contained in this report is for the use of advisers of AFSL entities authorised by The Advice Licensees in writing. General Advice Disclaimer: The information in this report is general advice only and does not take into account the financial circumstances, needs and objectives of any particular investor. Before acting on the general advice contained in this report, an investor should assess their own circumstances or seek advice from a financial adviser. Where applicable, the investor should obtain and consider a copy of the prospectus or other disclosure material relevant to the financial product before making any investment decision to acquire a financial product. It is important to note that the price or value of financial products go up and down and past performance is not an indicator of future performance. Analyst Certification: This report has been prepared and issued by the IOOF Research team members, who certifies that: (1) all of the views expressed in this report accurately reflect his or her personal and professional views about any and all of the subject securities or issuers; and (2) no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein. The writers, and/or entities in which I have a pecuniary interest, None. The Advice Licensees believe that the information contained in this report has been obtained from sources that are accurate, but have not checked or verified this information. To the extent permitted by the law, The Advice Licensees, its related bodies corporate, its directors, officers, employees, authorized representatives and agents accept no liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of the information contained in this report, or in relation to, the contents of or omissions in this report. This report is current as at the time of publication but may be superseded by future publications. You should confirm the currency of this report and obtain summary information about: material interests and Research analysts’ holdings; the qualifications and experience of the IOOF research team; and the coverage, criteria, methodology and spread of ratings from http://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process If an investor requires access to other research reports they should ask their adviser who can obtain these from their dealer group intranet