Advisers are becoming increasingly concerned by platforms’ “regression” when it comes to offering a quick and simple investment process, according to research by CoreData.
A study examining the changing dynamics of investment platforms found the biggest worry for advisers was the lapse in improvements to fund supermarket systems, with 22.4 per cent of the 972 advisers surveyed highlighting it as a top concern.
This is more than three times the figure reported in 2015, when just 7.6 per cent said it was their biggest worry.
The survey reported a drop in the number of advisers citing online access and communication as an area for improvement, with just 9.5 per cent urging developments in this area, against 15.6 per cent last year.
A race to the bottom amid frenzied competition means some will need to adopt more disciplined pricing structures. CoreDataThe report stated the sector is at a “critical juncture”, pointing to pressure on margins, the increasing complexity of regulatory compliance and the threat posed by digital disruption.
“Platforms might be increasing assets under management, but a race to the bottom amid frenzied competition means some will need to adopt more disciplined pricing structures to hit profitability,” read the report.
“Amid such stiff competition, it has become even more important for platforms to generate high levels of satisfaction among advisers,” the report read, adding this will determine the winners and the losers.
The number of wealthy clients being catered for by advisers has slipped slightly in the wake of the Financial Advice Market Review, as IFAs shift their focus to less affluent clients.
According to CoreData Research, the proportion of an adviser’s client base made up of high-net worth investors has dipped to 31.7 per cent this year, compared to 34 per cent in 2015.
This is a drop of 13 per centage points compared to three years ago, when high-net worth clients made up nearly 45 per cent of the client base.
Meanwhile, the research - which was compiled in June - found advisers catering for high-net worth clients had significantly reduced their platform usage, with just over half using a platform on a daily basis, compared to 71 per cent a year ago.
Daily platform usage among advisers focused on mass market clients had nudged up to 45.3 per cent this year though, from 40 per cent in 2015.
The research predicted a reshuffle in the platform market, particularly as 14 per cent of advisers said they would probably add at least one more platform to their business in the next year.
This was up from 8.5 per cent last year, which CoreData said reflected how regulatory pressures around platform due diligence has encouraged advisers to use multiple platforms to cater for different client types.
However, figures also indicated a large drop in the number of advisers expected to increase business on their main platform over the next 12 months, falling to 29 per cent this year from 43 per cent in 2015.
Frances Kemp, independent financial planner at Nurture Financial Planning, said: “This marketplace is consolidating rapidly and as back office integration improves, so does the launch of more and more ‘self-service’ functionality available to the public.
“This is good and bad. The good news is that those who are unable to afford financial advice after RDR can now access the same platforms, but no doubt mistakes will be made – and who will be to blame?
“We are not concerned as we stick to our few preferred providers and constantly review the sustainability of these.”
Patrick Connolly, IFA at Chase de Vere, said: “We are seeing acquisition, merger and IPO activity and we expect further fallout over time, which will reduce the number of platform providers.
“In this environment it should be easier for the remaining providers to be profitable and so more able to invest in their systems
“This won’t happen overnight and the challenge for independent advisers will be picking those platforms which will be viable in the future instead of those that will fall by the wayside.”
katherine.denham@ft.com
