CompaniesApr 15 2014

Platforms still an ‘immature market’: Nucleus

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Platforms operate in an immature market and a number of operators will not survive following disruptive changes introduced by the regulator due to an inability to evolve systems to cope with user demand, according to Nucleus.

Speaking to FTAdviser, Barry Neilson, business development director at the adviser-influenced wrap, said he expects there to be consolidation in the market eventually, but added this could take some time as “this still feels like quite an immature industry”.

He added that the majority of platforms have only been around for a relatively short period of time and continue to struggle to achieve profitability. Mr Neilson even suggested older incumbents such as Skandia and FundsNetwork are effectively having to re-launch as “a new business again”.

Last year, Altus published some research which showed that although the total revenue made by 20 of the 21 top adviser platforms has more than doubled in the last six years, costs have also increased in line with growth and in fact continued to outpace the gains made in revenue.

According to Kevin Okell, director of Altus, most platforms were hovering around the break-even point, with some outliers on both the profit and loss sides.

Mr Neilson added that now is the time for platforms to adjust to user demand, as advisers are “a lot more savvy” than they used to be.

He said: “[Platforms] really had to instill a lot of change in their proposition, partly because of the regulatory change and partly because the user demand is changing heavily

“Now it’s time for platforms to adjust. Some of these adjustments is legacy from RDR so clearly people are still struggling a bit to do unit rebates and adviser charging – so a whole lot of stuff that has been a while for fruition still isn’t there.

“Technology now can have a huge positive impact on IFA businesses if it is used correctly and as a result of their increasing awareness, their sphere of reference now is so much wider than it could have been so as a result they are much more demanding in terms of what they want.”

As an example, Mr Neilson flagged up that Fidelity, Ascentric, Cofunds and Skandia “have all come out and said they will be ripping out their current technology and moving to a different technology provider and that isn’t a trivial task, but is a massive project”.

He said: “What’s happened over the last few years is because of how the RDR was implemented, it’s been quite ‘bitty’. It’s taken a lot of time to understand what was really needed from platforms.

“So as all these little changes have come in and the impact to the changes have dawned on people, some businesses have looked at their technology and it doesn’t work for a future market.

“These firms are changing their technology because clearly the prospects for the platforms to get it right are really strong.”

Update 16 April 2014: The article has been updated to remove a reference to Cofunds as Cofunds since confirmed that while it considered changing its technology, it did not proceed with it.