The battle for adviser platform supremacy will be won or lost on how systems are setup for the inevitable re-platforming and re-registration challenges that are set to come, according to several industry experts.
Bruce Davidson, a principal consultant at Altus, told FTAdviser he was worried about the long term health of platforms that stick to legacy technology for too long, as “in a couple of years it will be hard to compete with competitors on more efficient technology and a lower cost base, as well as investment in replacing technology”.
He did however suggest that the big three ‘fund supermarkets’ will re-platform successfully, by finding more innovative approaches and internal start-ups.
“Setting up a new platform from scratch, with a simple automated operating model, and then re-registering business that ‘fits’ the new operating model to it, will allow leaner projects that deliver benefits faster,” Mr Davidson explained, adding that some long-standing customers with accounts written on unusual terms or non-standard assets may find they cannot move across and ultimately need to adapt or find a different platform.
Bravura provides the technology underpinning several UK platforms and Kirsty Worgan, its business development director for EMEA, warned that the Financial Conduct Authority has plans to drill deeper into the process of re-registration in order to determine whether consumers are losing out due to slower transfer times.
Last March, the FCA expressed disappointment in platforms’ progress on re-registration, telling providers that it wanted to see further progress, including on areas such as disproportionate exit fees that act as a barrier to transfers. Its review of platform rules implementation demanded that consumers be able to transfer from one platform to another in a reasonable timescale.
She pointed out that following the financial crisis, most IT budgets have been reduced to a minimum level. When accompanied by an unprecedented amount of legislative change, causing significant costs for providers to remain compliant, many have been unable to focus on product innovation.
“In the last couple of years, we’ve seen some market volatility, with more and more people transferring funds from one provider to another. The traditional process of transferring a fund was lengthy and complex, sometimes taking weeks or months, especially for multiple funds.”
Ms Worgan said that while the industry has made progress, there is not a lot of cohesion because a variety of software is being used by different providers.
“For advisers, re-registration offers a one stop process. Historically they would have had to go to various providers to cancel and get new investments/paperwork. Now, in theory, it should be a lot quicker.
“Consolidation of pension pots and Isas should be easier and cheaper, what previously took months, could come down to days,” she continued, adding that until the government puts its full weight behind the changes, “we are unlikely to get to where the industry wants or needs to be”.
Mark Polson, founder of the Lang Cat consultancy, said that those on ‘legacy’ systems – mainly ones which were designed to deal with bundled share classes and trail – are hard to work with in this post-RDR environment.
“Re-platforming is a way to deal with that, but it’s not what you’ve got, it’s how you use it. We think that within five years, even those who retain proprietary technology will have shifted away from old systems – perhaps not to the big three of Bravura, FNZ and GBST – but to something they’ve worked on internally.”
He added that whatever the approach, advisers will favour those platforms which achieve a safe re-platforming, rather than a quick one. “We’d also counsel caution about lots and lots of new developments of greater and greater functionality, even on newer systems there is a lot of space still for getting the basics really right before getting excited.”
Mr Davidson suggested that clarity of proposition and execution potentially matter more than technology capability, however having an appropriate model that supports the platform’s proposition will be important.
“Few - if any - platforms will be able to sustain the costs of their own bespoke technology. I also expect the different technology and outsourcing vendors to sharpen their approach, concentrating on areas of the market where they have commercial strength and a good proposition, rather than trying to pursue every sales lead in any avenue regardless of fit with existing business.”
He also predicted a short term pause in the price war as platforms invest in the technology and bed it down, which would benefit advisers and their clients.
peter.walker@ft.com
