Legacy systems stifle progress

This article is part of
Platform Special Report - October 2015

There has been unprecedented legislative change in the UK’s investment market during the past few years.

The RDR, auto-enrolment, pensions freedoms and Nisas, coupled with people living longer, are all changing the investment and savings landscape and contributing to the considerable growth the sector is set to experience in the next decade.

However, these changes have put huge stresses and strains on systems, requiring them to be either updated or replaced altogether. The benefit is that we have seen a lot of standardisation of processes, so that the bar for basic competence in platforms is set very high.

We’re a long way from the technology of the early days of platforms. Straight-through processing now dominates and error rates in the 1/100ths of a per cent are achievable. Millions of transactions go through these systems every day, and the overwhelming majority happens without a hitch.

But the challenge for many platforms is that while new business flows are carried out on this new technology, there are still billions of pounds of holdings on old legacy systems.

Advisers need administration systems that can accommodate increased flexibility around what consumers do with their pension and Nisa savings and managing multiple, small-sized workplace pension pots that may accumulate during a working life.

Faced with these demands, in-house legacy systems are unlikely to cope and are holding platforms back from embracing the opportunities provided by today’s cutting-edge and mobile-based technologies.

Through auto-enrolment and pensions freedoms, the retirement savings market will become far more of a mass market than is currently the case, and satisfying the needs of the end-customer will be crucial.

Modern adviser platforms will need to deliver engaging and personalised investment and pension account information directly to the investor wherever and whenever they need it.

Banks have spent money on developing digital propositions with mobile apps and website adaptability for mobiles and tablets, but platforms – forced to focus their technology spend on adapting to legislative change – have been slow to do the same.

Platforms’ margins are being squeezed and the cost-efficiencies of systems able to move data quickly and securely and then to present it in an engaging and user-friendly format are huge.

Being able to view holdings and transactions from a mobile device, interact with calculators and tools, view statements and instantly and securely message financial advisers and wealth managers is also highly compelling for investors.

Although some platforms are already making the most of today’s technology to offer an effective adviser tool, too many are woefully behind the curve, hampered by legacy systems that are unable to support the interactive, mobile experience that customers are enjoying in other sectors.

Modern platforms need technology infrastructures that are designed to support the needs of the customer from a single, flexible central core. They need powerful integration layers that enable straight-through links to different user interfaces and different back-office systems according to need.