Floundering platform owners have a choice

Floundering platform owners have a choice

Have we reached a pivotal moment where some platform owners are grappling with the possibility that their holdings may not make significant money, nor indeed return their original investment?

Given the potential deals which have been in the offing, consolidation seems likely. Investment advisers need to ask themselves what they will do so they can stay in control in any number of scenarios.

Arguably more important still is the need to ask the same question should there be no significant consolidation. The market could divide into those platforms with a strong strategy and the money to back it and those that, if not quite adrift, are not getting anywhere fast either. There must be a risk some could close.

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This is not, of course, anything like the horror show presented by the closure of life offices. Those came with all those varying promises to different types of investors and policyholders, the need to rely on the financial engineering of consolidators, clients’ frustration with market value adjusters – and the suspicion that the new owners still reward themselves handsomely.

But for anyone who thinks platforms cannot cause massive headaches, it might be worth finding an adviser who was unlucky enough to have selected American Express for their wrap.

The US multinational launched a UK platform, called Amex, in March 2004. Nearly two years later, after failing to find a strategic partner to help grow the business, it closed the platform down amid reports that it had only about £50m in assets under administration.

Clearly we should hope that any contemporary development in the platform space will be neater and tidier. Indeed, one mooted deal – which now appears to be off – would have represented a rather neat fit, something for which I think the industry would have been grateful.

But advisers should consider the stark choices facing some platform owners. They must either continue to invest large amounts of cash – factoring in any dramatic adjustments to government policy on pensions and ISAs, but perhaps without a clear route to profitability in sight – find a buyer, or simply close up shop.

Now, I am convinced that advisers will have put a lot of time and energy into decisions over which platform to choose. Where there might be a bit of a flaw in the strategy is over the choice of a second home for clients’ money, perhaps encompassing those with smaller sums accumulated.

Many advisers display remarkable resilience and acumen, and some firms may well have all this in hand. But it might not hurt to run a few scenarios. What if your main or secondary platform was sold to what you view as an asset-stripping firm, or simply gave a few months’ notice that it was to pull out of the market?

What if the platform isn’t getting the necessary maintenance it requires to keep up to speed with industry developments?