Long ReadMay 31 2022

Should an advice business white label its platform?

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Should an advice business white label its platform?
(Eva Elijas/Pexels)

This can revolve around the parts of the business that are outsourced, including the platform and associated services and the investment management. 

Platforms have been a particular source of stress for advisers in recent years, with high-profile re-platforming disasters at a couple of businesses, which has prompted many advice companies to ponder whether or not to 'white label' a platform solution. 

White labelling refers to a product or service that has been made by one company but sold by another. White label products are purchased by the latter company without branding, that way the purchaser can customise the product with their own branding, allowing customers to associate the product or service with them. 

The first question to ask as an advice firm considering doing this is, how deep do you want to go?Mark Polson, the Lang Cat

Chris Law, UK sales manager at Praemium, a company which offers a range of white labelling services, says many advisers approach him to explore the possibility of white labelling, “but then realise how complex it can be, how much work they have to do, and decide it is not for them. But there are a lot of options.” 

Ola Abdul, chief executive at Fundment, which provides outsourcing services to advice businesses, says: “We separate white labelling out from the approach of ‘adviser as a platform’, we think they are very separate things, although we do both.”

Mark Polson, principal at consultancy the Lang Cat, says the term white labelling is something of a misnomer as there are a wide variety of outsourcing options available.

How deep do you want to go?

The simplest of these, and a service offered by most providers, is placing the advice company's branding and logo on the website.

Law says the next level up is “for all communication” the client receives, including the application form of new clients, to be branded and carry the advice company's logo. 

Then come the slightly more involved options, where the choices revolve around how much regulatory and reporting responsibility an adviser wishes to take.

Polson says: “The first question to ask as an advice firm considering doing this is, how deep do you want to go? You can go into it up to your toes, which might be the simple branding, up to your ankles, up to your knees or, indeed, up to your waist.

"One of the options is to outsource in the sense that the regulatory and compliance functions are with the platform, not the advice firm. The advice firm effectively gives a strategic commitment to the technology provider in exchange for that.

"Then there is the 'up to your chest option', which involves the advice firm taking on the responsibility for the regulatory and compliance. This is the Hubwise and Seccl approach.” 

Ben Hammond, investments director at Altus Consulting, says a major consideration for businesses considering absorbing all of the regulatory and compliance functions themselves is that they must have a nominated person to the Financial Conduct Authority within their business in order to do this.

Pros and cons

He says this is likely to mean extra staff cost, whether that comes from hiring a new person to fulfil the FCA obligation, or diverting an existing employee to perform that role and so having to hire a new person to take on their previous duties.

Polson says white labelling “shouldn’t be viewed as just an easy way to make an extra 10 basis points of revenue. An example I have seen is an advice firm might charge 30 basis points to the client for the platform, and pay out 15 basis points of that to the technology provider, thinking they can keep the extra 15 basis points.

"But a firm we know of, run by smart people, found that after all of that, they were only really making 2 basis points for themselves, and it seems like a lot of work for two basis points.” 

Law says that some businesses “benefit hugely” from white labelling, particularly if they have the scale to make the small savings worthwhile, but the bulk of the business his company does is with advice businesses that are seeking to not have the regulatory and compliance function performed by themselves. 

Hammond’s view is that advice businesses with assets under management of £200mn or more may have the capacity to benefit from an approach that involves outsourcing the regulatory responsibility.

I think the platforms have learned their lessons from the events of the past few years.Mark Polson, the Lang Cat

While businesses below that are likely to be more suited to a more traditional approach, where the technology provider also acts as the regulated entity, and businesses with assets in the range of a “few billion” may choose to use a provider which requires the advice firm to assume full regulatory responsibility. 

Polson says there are many different versions of this approach available, with advice businesses choosing to do some elements and not others, but says it is vital that an advice business is very clear on “who is responsible for the client money. If something happens and they have got that wrong, then the consequences are severe”.  

One of the functions advisers can choose for themselves is to run their own portal, something which Fundment's Abdul says is quite popular.

He says: “Some advisers want to do this because it means all of the tech is integrated. Some like doing it because they enjoy technology, some like doing it because they believe it improves the experience of their client. We try to be as bespoke as possible.” 

Legacy issues 

Abdul says one of the drivers of interest in the various forms of white labelling has been the travails of the large advice platforms that embarked on re-platforms, with calamitous consequences.

He says the thing that concerns many of the advisers to whom he has spoken has been that those large platforms themselves use outsourced technology, meaning the adviser feels even less in control.

But Polson says advice businesses should be wary of thinking that by taking a more in-house approach to technology, that this will necessarily mean no problems in future. 

He says: “In the first place I think the platforms have learned their lessons from the events of the past few years, and will allocate the right amount of resources to technology upgrades in future.

"But even with a white labelling solution, things change in business. Some of the tech providers will change how they do things, there could be a change of ownership. You could also have those firms changing their technology.” 

David Thorpe is special projects editor of FTAdviser