PlatformsNov 14 2016

‘Further innovation is crucial to continued success of platforms’

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‘Further innovation is crucial to continued success of platforms’

So far in 2016 Standard Life has purchased Axa Elevate and more recently Cofunds was sold to Aegon, and while further moves are likely to be put on hold in the wake of Brexit uncertainty, many advisers think consolidation in the platform space is set to continue. 

The results of Investment Adviser’s 2016 Platform Survey show 82 per cent of respondents think there will be more consolidation in the industry, either on the basis there are simply too many platforms to survive, or – as has been the case in some instances – the smaller platforms will merge or be acquired by larger entities. 

In terms of actual usage, 60 per cent of respondents use platforms for 75 to 100 per cent of their business, although the average number of platforms used has fallen slightly. 

Last year 40 per cent of respondents used three or more platforms and a further 26.7 per cent employed four or more for their businesses, although all respondents used at least two of the facilities. However, this year roughly 5 per cent of those surveyed said they only use one platform, 36 per cent use two, with 59 per cent employing three or more. Part of this could be consolidation in the market, while comments from respondents suggest reliability, user-friendly features and value for money means they don’t necessarily need to look elsewhere for their clients. 

Transact, which was the most popular option among respondents with 30 per cent naming it their preferred choice, was praised by many for “the most complete, robust and independent platform available”, ease of use and “all the features you will ever need”, as well as offering a “wider range of investment assets and being truly independent”. 

Picking the right platform can be difficult, but in keeping with regulatory requirements and good practice 71 per cent of respondents review their platform due diligence at least once a year or more frequently, with just 4 per cent claiming never to review it. 

In terms of selection drivers, the issue ranked important or very important by most respondents at 96 per cent was system reliability. Other high-scoring factors included transparency and technical support at 93 per cent each, while the financial strength of the platform was important or very important for 92 per cent. The issue of costs was rated highly by 89 per cent of respondents, with the same number also highlighting the need for no platform exit fees. 

Interestingly, access to exchange-traded funds or products and investment trusts – which has previously been considered an issue – was of less concern, with the proportion of advisers ranking these as important at 64 and 53 per cent respectively. Additional comments from respondents highlighted the need for platforms to be compatible with back-office systems, as well as offering “simple adviser-facilitated charging collection mechanisms, good local support, cash account facilities and super clean share classes”. One respondent added: “Cost and choice of funds are number one considerations.”

In this year’s survey, technology has once again been a driver for an increased or decreased use of platforms, while pension reforms and new business were other high-scoring factors. Additional comments suggest the continued move to outsourcing is also a factor and platforms need to keep up. Respondents noted that “building and running in-house model portfolios” was a reason for their choice of platform, as was discretionary fund manager (DFM) access. It is therefore unsurprising that more than half of all respondents rated access to DFMs, model portfolios or risk-targeted/rated funds as important or very important. 

With the platform industry likely to see further change as macroeconomic concerns abate, it is clear that facilities are still of key importance for advisers. The need for further innovation and adoption of features such as electronic signatures will also be crucial to their continued success.

Nyree Stewart is features editor at Investment Adviser