Transact: 'Platforms have a £3tn opportunity'

That is because when Gunby first began to occupy the chief executive’s office at Transact, he was following in the footsteps of one of his closest friends, Ian Taylor, the original architect of the Transact business.

Taylor retired from his role at Transact in 2021, and died in 2022. 

Gunby says he "hasn’t changed the office much. Ian and I were opposites in so many ways, but we were great friends. When he was looking at joining Transact, I was one of the people he spoke to about it, and I remember thinking what a big risk it was. But he made it work. I have so many memories of Ian and stories.

"We met when we first worked together, and I remember once Ian’s car broke down and he asked for a lift to work, so I said no problem, but I was playing squash that evening.

"Ian asked me if there was a bar at the squash club, and there was. So while playing squash, he sat at the bar having a drink and doing a crossword. And that became a bit of a routine for us for a while."

The thing that isn’t changing is that service levels are the most important thing.

Gunby became chief executive of Transact, having previously been head of strategy, at a time when the platform industry was undergoing the first major wave of change since Taylor and others came to the market with platforms that were not part of bigger organisations. 

That change encompasses the challenge of dealing with falling asset prices for the first time in decades, consolidation among advice firms, the rise in model portfolio services and the rapid adoption of new technology by competitors and customers alike. 

Gunby’s view is that while all of these changes are happening, “the thing that isn’t changing is that service levels are the most important thing. Scale and technology mean we have been able to implement price cuts every year for the past 15 years, but service is the number one.”

Transact presently has 7,500 advisers on its platform and 228,000 customers. 

Gunby says about a third of the new inflows each year are from existing clients doing more business on the platform. 

Tomorrow's world 

In terms of service levels, he says one of the innovations that began as a temporary measure during the pandemic but which is now a growing part of the business is the use of live chat and screen sharing to deal with adviser queries. 

He says: “Of course we could do that before the working from home culture becoming part of the adviser's life, but actually it wasn’t that popular then. But now it is the primary way we communicate with advisers. They are much more confident communicating this way and find it more convenient.

"More recently we have added the capacity to screen share, and to take over the adviser's screen, and it helps advisers not just to have us solve the problem for us this time, but for the adviser to know how to solve it in future.

"Those things are very popular, advisers are switching to those and away from phone calls. We have gone from having 10 staff on live chat to 20 on it in a very short period of time. That’s why I think the platforms that focus on service will win.”

He agrees that the industry as a whole has a long way to go on some aspects of client service, noting that around one third of all transfers between platforms do not go through first time for technical or other reasons, which he believes should be easily surmountable. 

Although he was always aware of platforms through his friendship with Taylor, it is the more sedate world of management consulting that Gunby spent the bulk of his career.

He worked for a business called NMG, a management consultancy in the financial services space, and as a result worked around the world.

Gunby says: “I worked across the world and it was great fun. It got to the stage where I was living in the US, and a project came up in Mexico City, and I agreed to take it on simply because I hadn’t been there.

"But as you get older, the appeal of that wanes, and our children were getting to the stage where education was more serious, so we moved back to the UK. I was wondering where I would work next and Ian invited me to join Transact.”

Part of the reason platforms may be said to be facing an existential crisis is that many of those businesses grew rapidly in the decade after the financial crisis as asset prices rose sharply, delivering higher platform fee income.

But with markets much more volatile than many clients had expected, and the assets under administration for platforms having taken a hit, how can platforms create business models that are less reliant on market sentiment, especially given how hard it is for advisers to transfer between platforms? 

Gunby acknowledges that to some extent the revenues of a platform business will always be sensitive to market movements, and indeed Transact has tried to diversify their revenue streams by partnering with BlackRock to launch model portfolios.

There is between £2tn and £3tn of assets out there between pots after auto-enrolment and cash savings that can be invested on platforms.

Gunby says these portfolios have gathered “£70mn of assets from 40 firms. A lot of the firms have put a little bit of their clients' money into it, to see how it performs, which is understandable, so we are very happy with how that is going.”

But he adds platforms can grow simply in line with the wider savings market.

Gunby says he believes there is “between £2tn and £3tn of assets out there between pots after auto-enrolment and cash savings that can be invested on platforms, and with pension regulations as they are, more and more of those assets are going to end up on platforms every year.”

He says existing advisers that use the Transact platform, placing new client money onto it accounts for 60 per cent of the inflows, something he believes validates the notion that demand for advice continues to grow and therefore so will demand for the services of platforms, even if that means there are periods of volatility as markets fall. 

The UK adviser platform market was to a large extent shaped by a handful of dominant personalities who rode the wave of rising markets and rapid technological change.

The next iteration is taking place when all of those personalities have exited the stage, and the factors that powered that growth are diminished; in that changed world the actions of Gunby and the new generation of platform bosses will sharply impact advisers' lives for many years to come.  

 David Thorpe is investment editor at FTAdviser