Platforms have failed to remain profitable in 2013, with falling margins and rising costs said to be the reasons, Kevin Okell, director of Altus Consulting, has claimed.
In the Bath-based firm’s 12-page white paper, The Platform Machine: Tuning for Efficiency, Mr Okell revealed that after a brief period of profitability in 2012, the platform industry slipped back into collective loss in 2013.
Mr Okell said: “There was a collective increase of £60m in cost across the platform sector last year, with only two of the top 20 platforms actually managing to reduce expenses.
“It is easy to blame regulation for these costs, but the truth is platforms were supposed to be the big winners from RDR, and these figures suggest it has been a hollow victory so far.”
The Altus paper revealed a clear gap between the filed revenues of the top 20 platforms, which amounted to over £740m in 2011, and their total expenditure for the same period, which amounted to almost £790m.
According to Altus figures, the average yield on platform assets fell to its lowest ever level of 34 basis points – down from over 50 basis points in 2010, and 80 in 2006.
The firm also predicted that costs for the majority of advisor platforms would continue to increase in line with revenues. There was also as an over-emphasis on asset growth, and insufficient attention to back-office costs.
Mr Okell said: “With several of the top 20 platforms investing heavily in new technology this year, and several more price cuts working their way through the system already, we do not expect this overall profit trend to change much in 2015.
“That is why it is more important now than ever before for the industry to get a firm grip on where platform costs are headed, and to make sure those in-flight technology projects deliver a solution that will really bring expenses down.”
Adviser View
Ian Gwinnell, director of Staffordshire-based All Counties Financial, said: “I fully understand the findings of the report. While platforms are the way forward, most are complex and require an entire new learning process, which for some smaller firms with fewer resources creates difficulties.
“It will get easier when people understand, but it will take some time.”
