PlatformsMay 20 2016

Platform competition ramps up

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Platform competition ramps up

Fierce competition in the platform market has continued to intensify after a number of high profile acquisitions, with large providers targeting each other as the battle to dominate reaches full-flow.

After years of rumours, consolidation in the market has finally begun. Standard Life has created one the UK’s largest advisory platforms with the purchase of AXA’s Elevate platform, in what it says will create a “unified business with additional scale, expertise and resources to support the rapidly growing demand” from financial advice businesses throughout the UK.

The acquisition has added more than 160,000 customers and further assets of £9.8bn, resulting in combined assets under administration of £36.4bn with 350,000 customers and net assets inflows of £5.7bn in 2015. Standard Life’s existing cash resources will fund the move, which is still subject to certain conditions being met, including regulatory approvals.

Jonathan Rowley, independent financial adviser at Sheffield-based Hamnett Wealth Management, said this acquisition is likely to be beneficial for the advice industry, “The acquisition of Elevate as a very positive move. It has struggled with poor service and has never delivered on key promises to deliver a set level of AUM, nor hit profit targets. Standard Life has been excellent on customer service, has delivered on acquiring the AUM and has done so profitably.”

Mr Rowley added that any lingering concern about the future of AXA’s platform has now been put to rest. “The key thing for us is that both platforms allow us to use our investment proposition at a great price. Rumours of Elevate’s desire to sell out were rife and the uncertainty has been removed,” he said.

Meanwhile, Aegon UK has also been in acquisitions, as well as sales. In April, the company sold two-thirds of its annuity portfolio to Rothesay Life for £6bn and, in the process, announced its strategy to free-up capital and develop the UK’s leading investment platform. Then, recently, it unveiled plans to acquire BlackRock’s defined contribution platform and administration business, but BlackRock will continue to provide the investment management solutions. Aegon UK’s platform assets have reached £7.4bn, up from £3.8bn from Q1 last year, with net inflows rising from £968m last year to now over £1bn.

Mr Rowley believes mergers and acquisitions are likely to continue, as companies look to ensure they can still compete in the industry. “I think there will be further consolidation in the market as new entrants realise that this is not a ‘get rich quick’ proposition. Late entrants will need to acquire if they are to compete. Aegon’s purchase of the BlackRock book shows how some players are looking to exit, raise cash and concentrate on key strengths.”

craig.rickman@ft.com