As I write, January 2016 – when you’ll read this – is another country, filled with the promise of a new year; a renewed sense of hope and a renewed tolerance for pictures of sunrises with motivational quotes across them on Twitter. One of those things is not true. But it behoves us to consider from whence we came, and to think about how that might inform our thinking for the new year.
Grunge and checked shirts
Much like 1991 in Seattle, 2015 in platforms was a time of grunge, although with fewer checked shirts. This was the year that saw platforms and other providers wrestle with finishing off their tech programmes for RDR and PS13/1 (see Money Management’s passim) and rush to get the necessaries done for what we at the lang cat call GLONPEND (the GLOrious New PENsions Dawn). Replatforming was important too, but we’ll come back to that, unless I forget.
The result of this feverish getting-stuff-done period was that the sector ended up looking pretty…what’s the word? Dull. That’s the word. Platforms are the closest thing the long-term savings and investment market has to fintech, but most of what went on was frankly pretty ordinary. Most platforms look, feel, and behave the same at the end of 2015 as they did at the start. A few have some extra bits; which is to say they’ve got fatter, much like my good self.
So here are the top three things that caught my eye in 2015:
For a start, I’m still not sure it’s a word. But it is a thing. During 2015 we saw big programmes for Nucleus, Ascentric, Alliance Trust Savings (ATS), Old Mutual Wealth (OMW) and others in the news. Of those, the only company that actually has new kit to use at the time of writing is Nucleus, which upgraded from an old version of its platform to a new one. Even that was brutally difficult, something CEO David Ferguson has described as a ‘near-death experience’. Ascentric is still working on its move to Bravura. ATS is about to go live with GBST. OMW is in a multi-year programme with IFDS. All of these programmes are being run by smart people. Many of them can do joined-up writing, pop a coin in the charity jar, and buy their mum flowers on Mother’s Day. That doesn’t matter. Replatforming remains the hardest thing you can do in this business that we call show. Advisers love a car analogy, and I have described it before as like changing a car’s gearbox. While driving it. Round the Nürburgring.
The coming year will see a number of replatforming projects capped off and going live. More will kick off. All will go over time, over budget, and over the edge in terms of adviser patience. The thing with replatforming, if you are an adviser reading this, is to relax. You can not rush it. Give providers space to breathe. The promises they made about when it would all be sorted were never in their gift; we will be charitable and say they did not know that.
The key point is that what you want is a safe migration, not a quick one. Resist the urge to play amateur IT consultant. Replatforming takes as long as it takes.
First things first, I love the term ‘robo-advice’. It winds earnest, serious people up on a number of levels and that alone is worth a fortune in my book. Robo-advice (and we should just get used to the term; industry suggestions like ‘remote digital advice’ or ‘algorithmic advice’ will have as much impact in changing the new convention as me telling my daughter to stop using the word ‘like’ as punctuation) made a real impact in terms of noise, if not in assets this year, and will keep doing so in 2016.
Have you had a look at the robos? Most of them do very little. You put in some information about your existing savings and how much you can put away; you set a goal, and then answer some questions on risk tolerance.
From that an asset allocation and a wrapper split is kicked out. You accept it, and then the system tells you whether you’re on track or not. That’s it. We have spent time both in the UK and the USA looking at these systems, and our finding is that there are no robots, and they are not giving advice. And this Star Wars-raised kid is pretty cross about that. While we’re at it, I’m still waiting for my jetpack.
My thing is this: all of you will be using robo in five years. You won’t call it that, but that first part of the process where you gather basic info including financial planning essentials like goals, timescales and attitude to risk will become slicker and more self-service orientated than you ever imagined. Whether the client then takes algorithmic advice (ha, ha, ha) or meatsack advice (which is what I’m calling financial planning where you sit in someone’s front room and eat their biscuits) is up to them.
We get tied up – I bet we still will in 2016 – about advice definition, and FAMR will intensify that. But the key point is that millennials – or ‘digital weirdos’ as Pete Trainor from Nexus put it at a recent event of ours – are happier self-serving data into a web interface than they are giving info to a nice man in a tie with a factfind on paper. Expect this to drift up through the age spectrum
3. Platforms are dead
This was the title of our 2015 advised platform guide (the original was ‘Not Waving But Drowning’) and we had fun fielding calls from over-earnest platform chiefs who wanted to point out how non-dead they were owing to many interesting criteria they had just made up.
What do I mean by ‘platforms are dead’? Am I just being clickbaity? Maybe a little, but there’s some important stuff in there too. Commercially, for instance, the average profit platforms make on the £326bn they collectively hold is 0.017 per cent.
Assuming the composite revenue take is in the region of 0.35 per cent of assets under administration, that ain’t great. So most are diversifying – launching DFMs, robo-advice, D2C, vertical integration and so on. Quite understandable. But what that does mean is that platforms as we understood them – an open architecture place to buy stuff – are changing quickly. We like saying that the platform market is a market of two: Nucleus and Transact. Everyone else is playing in different channels or at different points in the value chain (sorry).
Platforms are dead
Platforms are dead too because the market does not work. There are 30-odd propositions. All look much the same in many respects. Yet they can’t do what ordinary market participants do (succeed, fail, take one another over) because the sheer cost of integrating is so very high. So we limp along.
Most importantly, maybe, platforms are dead in their current guise because they have betrayed their original promise. Put it this way. If financial planning is now the product, why do so few platforms allow advisers to record goals, map portfolios to them and then record progress? Why does that have to be done elsewhere?
Many platforms do not let you hold two different model portfolios against the same client. Most have horrible, and I do mean horrible, ugly, lumpen reporting; many advisers tell us they would rather spend Christmas with their mother-in-law than put these in front of clients.
So it’s 2016. We have much to do. Let this be the year when we reconnect the stuff we build with the poor buggers who give us money to do just that. Let this be a year without massive political and regulatory shocks so our friends running platforms can get their stuff together.
And let 2016 be a year of peace. I wish you and your endeavours well for the year to come. It’s been great fun writing for Money Management in 2015, and I look forward to more nonsense in these pages (or on this page at least) in 2016.
Mark Polson is principal of platform and specialist consultancy the lang cat