How much does size really matter?

This article is part of
Platforms - October 2013

In the post-RDR world, the initial theory would be that the smaller players in the platform market would start to catch-up with the larger dominating platforms as regulatory changes evened out the playing field.

Since 2011, the market share of the top three platforms – Skandia, FundsNetwork and Cofunds – has fallen each year, according to The Platforum. The figures at June 2013 show 54 per cent of the market for the top three and 46 per cent for the rest of the industry compared with 67 per cent for the top three in June 2011.

The gap between the top five and the rest of the market is even smaller, with the addition of Standard Life and Transact only increasing the market share of the larger platforms to 67 per cent in 2013, compared with 80 per cent two years earlier. However, Holly Mackay, managing director of The Platforum, adds: “If we track assets under administration (AUA) growth, we actually observe the big getting bigger more quickly than the smaller guys. Although smaller platforms are posting strong percentage growth, we can observe a breed of mega platforms starting to pull away and accelerate.”

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Mik Cons, executive Partner at Parmenion, says: “Smaller platforms are currently taking market share away from the big platforms, but it’s not a case of big versus small in the platform world, it’s more like big versus beautiful.

“The big platforms were hugely innovative a decade ago and worked hard to add as many bells and whistles as they could, in the form of new adviser tools and an ever increasing choice of funds. Technology has developed at an amazing rate since then and the newer entrants to the platform space had the benefit of hindsight in the development of their technological infrastructure and processes”.

Pat Shea, head of Fidelity FundsNetwork, agrees that the overall market share held by the top-five platforms has fallen slightly as would be expected, but that gap between them and the rest of the market remains vast.

“At FundsNetwork, we have the ability to budget for regulatory change as well as re-invest heavily into the platform for the future. We recently announced that we are rolling out a multi-year, multi-million pound investment programme to deliver significant proposition and service improvements to our platform.”

Findings from CoreData Research’s Investment Platform Study 2013 suggest the UK platform market is splitting into three groups. It states: “There’s the old guard, the new guard and a group in the middle who are simply keeping their heads down and doing the best they can to grow as margins come under pressure and numbers of advisers directing flows via the platforms continue to shrink.”

However, it seems the size of their market share is less important to both advisers and the actual platforms and more focus is on the services available, with the CoreData study showing 34.5 per cent of respondents use three or more platforms.

Mike Barrett, platform marketing manager at Skandia, says: “From our perspective, particularly since the RDR, it feels less about big versus small, the focus for advisers is much more around client suitability and how they will be using platforms across their business.