Integration of IT is key for platforms

Market dynamics have changed for platforms, advisers and discretionary fund managers (DFMs), as the costs of doing business continue to rise and clients’ perception of price versus value remains a sensitivity.

The regulatory push to increase transparency to aid comparison choice for clients will continue and is likely to focus on fees, charges and performance reporting.

Before the industry ultimately wins the argument over the value of advice, price sensitivity within the minds of customers will actually increase. Therefore, the key to survival and prosperity is the ability to serve more clients, more efficiently, more quickly and more compliantly.

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And this is where technology comes in. We have already seen the hugely positive impact the introduction of platform technology has had on advisers and their clients. This has seen the value of assets held on adviser platforms grow to more than £300bn.

The big platforms were hugely innovative a decade ago, but technology has developed at an amazing rate since then. Some newer entrants to the platform space are arguably more nimble in the further development of their technological infrastructure and its integration.

Financial platforms will evolve from the ‘supermarket’ model to simpler and more personalised facilities. These thoughts were echoed by the FinTech50 panel, which recently scoured Europe in an attempt to find the 50 hottest innovators in financial technology.

Consultancy firm The Platforum also expects to see shifts in platform use this year as advisers continue to restructure their propositions to achieve greater efficiencies.

Successful integration of platform technology with the investment portfolio is revolutionary and has the power to significantly improve efficiencies for not only advisers and their clients but also for the platforms themselves.

There will be no shortage of clients as they value the reassurance that comes with professional investment management expertise and regulated financial advice. It gives them the confidence to invest and the composure to stay with the plan when they hit a complication.

More and more people will seek advice, particularly from April when the new pension freedoms come in to force. There will also be a need for greater flexibility in how investments are managed.

The market estimates that the value of the platform self-invested personal pension market may double to £300bn in the next two years. Investors using direct platforms already combine do-it-yourself investment management with some advice, but only about 25 per cent are happy doing things that way. The opportunities from technological integration and development are huge.

The World Wealth Report 2014 states that globally, 65 per cent of high-net-worth individuals (HNWIs) expect to run most or all of their wealth relationships digitally within five years. The report also dispelled several myths and stated that digital is not just favoured by younger HNWIs, but also by those in lower wealth bands and by investors who direct their own portfolios.

The future of both advice and the delivery of investment management expertise depend upon technology. This has overhauled goods and services in every other sector, yet within the wealth management sector the transformative power of technology lies largely untapped.