The chief executive of Embark is targeting cash management services to grow the platform.
Fresh from completing the acquisitions of the advised business of Alliance Trust Savings and then of the Zurich platform, Phil Smith said he intends to launch a cash management service, since this was an area of very significant growth potential for platforms.
He said “all of the sensible” platforms will launch such a service.
Mr Smith told FTAdviser: “The client with the smaller pot of assets tends to be quite risk averse, and so have a lot of cash in their portfolio relative to other assets, and they will want that to be managed.
"The client with the higher pots of assets is likely to have a higher risk tolerance, but also to have cash management needs in terms of hedging and foreign exchange. I think that is where the growth will be.
"We certainly won’t be launching a HR tool for advisers, and we don’t aspire to be a software company, but I think alongside the structural growth in the market from people needing to save for retirement and being retired longer, the potential for cash management is enormous."
Hargreaves Lansdown launched a cash management service in September 2018, which finds the best interest paying deposit accounts for clients.
Ben Hammond, platforms director at Altus said: “Cash management services were something that was very popular on platforms years ago, then it went away, I think for regulatory reasons. It makes sense for it to come back, but I don’t think it will ever be a major part of the market.
Mr Smith told FTAdviser that having made more than a dozen acquisitions in recent years, Embark's buying spree had probably stopped for now because there were no platforms that met the criteria he wanted for an acquisition.
Embark announced the acquisition of the Zurich platform business yesterday, and also recently bought the advised business of the Alliance Trust Savings platform. The combined business now has assets of £33bn.
Mr Smith said: "There are three reasons why any sensible business buys another business, one is to get access to distribution, one is to get access to products that your company does not have, and one is to get economies of scale.
"The deals we have done recently give us all three but I don’t see, of the platforms that are there now, any that would fit our criteria at the right price. I mean if a platform that has £5bn of assets came along and we could buy it for a quid we would, but apart from that, I don’t think there is more to come.”
He said the plan is to integrate the Zurich platform with £11bn of assets into the Embark one, but he did not expect this to cause any problems for advisers, despite the issues with replatforming that have afflicted companies such as Aegon and Aviva.
Mr Smith said: “We have completed 14 acquisitions in the past six years, and that is 14 integrations. One of the advantages of the Zurich platform purchase is they are on the same technology suite as Embark, so the risk of transfer is low. This is not a major re-platforming exercise.”
Both platforms use FNZ technology, though Zurich's version of the technology is older.
Mr Hammond said: “With two substantial deals to integrate at this stage, I think it makes a lot of sense for them to pause, and not take on more work in terms of integrating platforms.”
david.thorpe@ft.com
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