In a period of scarce profitability for adviser platforms, one wrap’s business development director has argued that scale in terms of assets and advisers may actually be counter-productive.
Speaking to FTAdviser, Nucleus’ Barry Neilson said that it will be those platforms that can define their customers most narrowly that will thrive.
“This strategy helps de-risk business on your platform and also cuts down on sales and servicing costs, as rather than having a disparate group of occasional users, you can foster more dedicated clients - it’s all about making yourself indispensable to a niche.”
Nucleus has not been shy about being picky with the advisers it has using the wrap, with Mr Neilson saying they turn away more than half of those that approach them.
As he previously told FTAdviser, this selection of “high quality” advisory firms are chosen for having “positive momentum” and being aligned with the same goals. This often means those focusing on higher net worth clients and run by younger advisers - platform participants have an average age of 46, 10 years younger than the industry average - are usually more tech-savvy.
A recent survey of the platform’s advisers found that the majority have between 100-499 clients, who typically own between £100,000 to £250,000 of investible assets, with the majority earning between £50,000 to £100,000 per year.
Just under 40 per cent of businesses manage over £100m at firm level and just over half manage assets between £20m and £100m.
Mr Neilson stated that advisers on the platform are seeing a real boost from the 6 April at-retirement reforms, which effectively offer another 20 years worth of holistic planning opportunities by doing away for the need to annuitise.
“The variety of options now available to retirees is great news and the changes to death benefits also opens up new inter-generational planning conversations, turning one client into a whole family.
“The adviser role is changing, with an increasing use of cash-flow modelling tools to move the conversation from a transactional one to a more aspirational and emotional connection to their finances.”
All of this means more work for Nucleus to ensure that these tech demands can be kept up with, building proper integration of cash-flow modelling, managed portfolio functionality and data connections with new initiatives advisers are setting up, like accountancy practices.
“There has been no settling down since RDR - if anything advisers are tinkering more than ever with their business models, and we have to keep up.
“Technology will be the new battleground for platforms, with some still having to upgrade and re-platform, which inevitably impacts on service and other enhancements.”
Of course Nucleus was not immune to such changes, having made a fairly bumpy move across to its new system that made 2014 a “challenging year”, according to founder and chief executive David Ferguson.
As for consolidation in the platform space, Mr Neilson said this was something that had been talked about for several years, but was being held back by most businesses just being too busy with things like tech upgrades and regulatory change to actually think about the competition.
“Its not as simple as for an investment manager taking over a boutique to boost their assets, I think deals will have to be genuinely transformational rather than just upping AUM.”
peter.walker@ft.com
