I know an adviser – get me, eh? – who is a prodigious and loyal user of a certain platform. In the face of shifting prevailing wisdom, through thick and thin, he and his team have hurled assets at his chosen partner, and over the years have amassed what platform financial directors like to call ‘significant AUA’, or what normal people would call ‘more money than you can shake a stick at plus the stick’.
He is also an avid, if frustrated, user of a large back-office system as one might expect.
Now, of the two he much prefers the platform – he knows the people, they treat him with courtesy and respect, and do their best to pick up the pieces when it all goes sideways, which is sadly all too frequent. He hates the back-office system with the heat of a thousand suns and will sound off about it to anyone who will listen, and many who won’t. If you see an angry guy shouting about reconciliations on the Tube, that’s him.
Despite this, he is very clear. The second he can place trades and rebalance portfolios from his back-office system, he’ll never log into the platform again, and nor will any of his people. He may be exaggerating slightly, but only slightly.
What’s the point?
Our man’s point is this: if his business is to be scalable, he has to get fragmentation minimised. Administration in successful businesses is not done on multiple systems, which only rarely and often grudgingly speak to one another. There is one point of data aggregation, one point of control, and the administrator spends all day, every day, in that one environment. In a post-RDR world, with spiralling regulatory costs, falling margins, increased capital adequacy requirements and all the rest of it, he needs his staff to be ninja-level on one system, not competent on many.
This is a battle which those interested in financial technology used to talk about a lot in the late noughties. It was called ‘the battle for the adviser desktop’ and it was sort of like Game of Thrones, except with less sex and dragons. Much, much less sex. And no dragons at all, if I’m honest. Sorry.
Anyway, the big fight was between platforms and back-office systems as to which would be the ‘point of aggregation’ for advisers. The idea is that if you are the point at which all the various bits of data intersect, then you really are in control. Logistics companies know this. If you have all the widgets in a bunch of containers, no-one’s getting their widget delivery without you being in a good mood and having your invoice paid. Amazon, for example, is a very good logistics company, with a website attached.
In our sector, whosoever controls all the data controls the triggering of Doing Stuff, which leads to fee income, which leads to big promotions and one of those office chairs which has armrests and everything.
So who won the battle? Well, no-one, really. There is no one system from which advisers can run their entire business. Administrators have to be ninja-level in several systems. And if you think that doesn’t matter, try being one. I remember being shown by one deeply frustrated admin person that a certain lifeco platform forced you to go digging in the back office when adding a new client. But every time you did and spent more than a few minutes without the platform as your active window, it timed out and you had to log back in and start again. Dual screens didn’t help, and Prozac and absinthe cocktails only made a slight improvement.
What did happen is that the debate went away for a while, mainly because everyone was moaning about qualifications and adviser charging. But it’s kind of back now, as business returns to something like normal.
Still talking
I’ve been reminded of the debate by a couple of things recently. First, I sat with a guy from a company called Sprint Enterprise. Sprint has a system called Fastrak which helps advisers build, maintain and review portfolios. To do this it receives data from all over the place, including back office providers and platforms, and allows advisers and their staff to build nice reports from it and all sorts of whizzy stuff.
I remember reviewing Fastrak about two years ago, and thinking at the time that it would be snapped up by a back office system or similar, as a useful missing piece for bringing asset reporting together in one place and enabling quick construction of client reports – with Sprint reporting that a typical report takes up to 5 hours, that ain’t a small boast.
But this hasn’t happened, and Fastrak is doing fine on its own two feet, even attracting a major investment from platform forefathers, Transact. Now, can you trigger trades or rebalances from it? No, you can’t. The messages don’t exist yet in a standardised enough form to whizz from system to system, and there are all sorts of banana skins about who carries the can when trades go wrong. But that’s only a matter of time.
The point is that both main contenders in the battle for the adviser desktop have been leapfrogged in a key point of aggregation by a piece of middleware. We didn’t see that coming.
If the problem is bad here, it’s much worse in the Republic of Ireland, where I was lucky enough to spend a few days with a provider who is launching a platform. This platform has ‘memo asset’ or ‘legacy asset’ abilities, which is to say that you can tell it about holdings elsewhere, and through the power of arithmetic it’ll times the number of units the client holds by the unit price and tell you a value. Voodoo, I tell you. Voodoo.
Hunger for aggregation in the Irish market, which is controlled by about 6 lifecos and just a few other providers, is such that early adopters of this platform are trying to use it to calculate rebalances not only on platform assets, but on the legacy assets too, and are now asking for the ability to fire trades off to these other providers. Clearly they shouldn’t hold their breath, but it’s interesting to see the thirst for aggregation and control in a market which doesn’t have a well-developed back-office sector.
I’m not an adviser, and there are a number of excellent reasons why that’s a good thing. But I do have the privilege of meeting lots of advisers, and chatting about their businesses, and fragmentation of technology often comes up. The creation of impactful, engaging client reporting which is as automated as possible is often mentioned as an area where the industry isn’t serving clients well. There are lots of others; this fragmentation is like a big hole in the profitability bucket of adviser businesses.
Both back-office systems and platforms have been huge leaps forward, and ‘disturbing’ technologies – in the right sense – in their own right. But, as with any new tech, eventually they become last year’s news, and get disturbed in their own right. I wonder if we might be seeing the early signs of what will disturb them – systems which sit in front of everything an adviser’s administrator has had to use and finally, once and for all, deal with the fragmentation and really do control the desktop.
Mark Polson is principal of platform and specialist consultancy the lang cat
