Advisers should be preparing for the fact that some of the platforms they use may be closing, merging or turning into ‘zombies’ in the near future, according to Standard Life’s wrap boss.
Speaking to FTAdviser, the group’s head of adviser and wealth manager propositions David Tiller, said that while there has been talk of consolidation in the space for many years, few advisers really doubted the viability of their platforms; but in recent months this has started to change.
“Hidden revenues are about to disappear, the share class conversion have revealed that the fund supermarket model doesn’t work, and Mifid II will also have quite a significant impact,” he explained.
“There’s also a lot of emerging competition in the market, you can no longer get away with a sub-standard proposition and just buy market share.”
Mr Tiller suggested that consolidation of new business flows will be first, with indications that advisers are already beginning to place clients with those platforms they see as sustainable.
“Then we’ll start to see zombie platforms emerge, those that are stagnating in terms of growth and also not getting bought up by rivals; without regulatory the pressure wouldn’t be like this.”
Standard Life’s house view is that by the end of 2018 there will be half the platforms that there are today, with as few as six in the adviser space supporting independent centralised investment propositions, as many will opt for going direct or targeting only institutional money.
While he would not be drawn on the details of ‘big plans’ due to be announced next month, Mr Tiller did state that if there are appropriate acquisition opportunities, Standard Life would not rule anything out, adding that any deal would need to maintain service levels for existing users.
At the end of last month, Novia chief executive Bill Vasilieff told FTAdviser that speculation around the sale of both Legal and General and Axa’s platform businesses signals a move by providers away from the market.
“The trend seems to be for larger platforms to put investment management guys in charge, look at Standard Life and Old Mutual Wealth, because ultimately they see the businesses as ways to sell funds,” he stated, adding “but given how expensive it is to run a platform, some of these institutions appear to be re-thinking the strategy.”
FTAdviser sister paper Financial Adviser reported that Barclays was appointed to handle the Axa sell off, which is being driven by the group’s focus on growing regions and emerging markets, rather than the heavily-regulated UK market.
Meanwhile, rumours have resurfaced this week that L&G is looking to offload its market-leading - in assets under administration - platform Cofunds, with the latest suggestions being that AJ Bell has been in ‘exclusive talks’, despite being significantly smaller in size.
Mr Tiller commented that success is not correlated with size in this market however, describing the platform sector as “quite Darwinian”, with the challenge being more around securing sufficient capital to adapt to regulatory change and invest in both front and back office technology.
peter.walker@ft.com
