(Pictured: Ashley Porter)
The ‘value chain’ in funds management, currently worth about 100bps, will deflate by 70-90bps in the next five-10 years, according to Ashley Porter, the founder of the zero-fee SMSF admin company McLowd. He provided a shock-and-awe presentation to the industry on the Gold Coast last week.
At the ‘My Platform Rules’ conference in Surfers Paradise, February 22-24, Porter stunned the audience of super fund executives, dealer group heads and platform providers with a presentation about the implications of “zero marginal cost production”, which is about to permeate all industries, he argued.
“License fees for SMSF accounting software total at least $30 million a year in Australia,” he said. “We are close to replicating that for a less-than-seven-figure sum. Why would you rent some software when you can own it for free?”
Porter, who started McLowd in 2012, having run a software engineering company and was looking for a new challenge, said that every software company in the world was subject to the same reality of zero marginal cost, due to technological advances such as cloud computing.
“It’s not just Class, BGL and so on in your industry,” he said, referring to the two main providers of SMSF software. “If you are running your organisation out of self interest, you are toast. Your role in the value chain has to change.”
Porter said that social capital was replacing financial capital and we may be witnessing the “eclipse of capitalism” due to its “festering inconsistencies” following about 200 years since feudalism.
He describes McLowd as an “online community” rather than a vendor, with most of the code writers working for free in the same sort of communal environment, which established Wikipedia.
Under questioning from the floor at the conference, he said that McLowd’s business model would involve clipping the ticket in various small ways, once the system is up and running.
The only bright spot for big businesses was that scale could be a savior in a zero-marginal-cost world.
The conference attracted about 150 senior industry people and included 37 speakers over two days in a TED-style rapid delivery program.
‘Robo advice’, the hot ‘fintech’ (financial technology) subject which has attracted more than US$1 billion of investment in just a handful of US start-ups in the past two years, was discussed during several sessions. Whether algorithmic information constituted ‘advice’ was questioned, but the consensus among the audience was that robo advice was going to grow rapidly. It represented, in the least, an educational tool available to everyone.
My Platform Rules 2 will be presented on the Gold Coast in February next year. The presentations are available on the website:
Note: the author was co-producer of the My Platform Rules conference, along with Patrick Liddy, principal of MSI Group.