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.”
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.
“It’s fairly unlikely you’ll be using just one platform as an adviser, it’s perhaps more of a primary and secondary platform relationship the adviser will be adopting in their business, and client suitability will be key around that.”
In this instance, he suggests the larger platforms could be adopting the primary relationships and receiving the majority of business from advisers, with smaller platforms offering a more niche customer proposition for the remaining clients.
David Thompson, managing director, Axa Wealth, Elevate, adds that all platforms need to continually invest to meet the constant, and rapidly changing, regulatory environment as well as the changing demands of advisers.
He says: “Elevate is not currently one of the largest platforms in terms of total assets but has met this challenge with the on-going support and financial strength of its parent company. We have also benefited from the fact we don’t have huge legacy asset issues to deal with.”
Ms Mackay points out that profitability remains a clear metric of platform success and in this instance smaller player have perhaps taken the lead.
“Small platforms have been more likely to outsource technology and also to run the business with notably fewer staff. It’s an interesting exercise to compare the sales and marketing costs in bps of the small platforms against their large, people-heavy peers. This all contributes to the bottom line which can make happier reading for smaller platforms.
“Small can be beautiful and I see opportunity ahead for smaller platforms servicing advisers with specific needs AND for larger platforms supporting broader customer bases. I think we’ll see and hear more differentiation about exactly what type of customer any given platform is good for.”
Nyree Stewart is deputy features editor at Investment Adviser
BIG OR SMALL?
“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.”
Mik Cons, executive Partner at Parmenion
“The focus for advisers is much more around client suitability and how they will be using platforms across their business. It’s fairly unlikely you’ll be using just one platform as an adviser.”
Mike Barrett, platform marketing manager at Skandia
“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. We expect this will deliver significant flows to the platform over the coming years and preserve our market share.”
Pat Shea, head of FundsNetwork
