Typically industries are created and evolve in an S shape, with an initial slow pace of innovation creating the new product before this steepens as more capital and people become interested and the pace of progress intensifies, resembling the steep incline of the S. This is usually followed by a period where innovation declines, producing something that looks like the downward arc of the S.
This is often followed by a period of consolidation across an industry as market participants seek to add profit from economies of scale, as the opportunities to do so from innovation diminish.
Then there usually follows a fresh wave of consolidation as a new generation enter an industry.
The UK adviser platform industry arguably followed this pattern, with companies started from scratch such as Nucleus, Transact and others driving innovation, but as the industry reached the peak of the S, the returns and innovation declined and platforms began to buy each other, or be taken over by private equity businesses eager to achieve economies of scale.
Among the principle beneficiaries of innovation within a sector are the customers – in the case of platforms, this is advisers.
So what might be in the next wave of innovation for the platform industry?
For Emma Napier, who works as part of the business development team at platform technology provider Bravura, the direction of travel is clear, with platforms increasingly using external “bits of kit” that do a specific job in order to make their overall offering better, rather than trying to do all of this work in house.
Ben Hammond, platforms director at consultancy Altus, says the platforms of the future will do only “what they are good at”, and outsource the rest. This model is called using 'micro-services'.
Napier says: “People will start to build new platforms that are basically just a collection of micro-services. A lot of discussion in the industry is around price, but I think that will also come down to, does the adviser want all of the bells and whistles that a platform can do, that is, do they want all of the micro-services or just some of them?
"By operating in this way, each platform can continue to exist, but be offering something different to each adviser. That is where the next lot of innovation is going to be, it will not be about a big bang moment.”
Hammond says it will not be a case that substantial new technology is created to enable this, rather that the technology exists but platforms will begin to use it in a different way.
He says the second way in which this will develop is that more “white labelling” will become possible, with advisers able to have substantially more control over the platform they get.
He says: “I think the technology is evolving to the point where white labelling will happen much more frequently, it is certainly an area that has been growing for many years.”
Mike Barrett, consulting director at the Lang Cat, says the increased technological capabilities available to platforms are likely to mean that how advisers interact with existing clients changes.