For years, one of the best games in the sector was to predict how many platforms would be left at a certain date, often 2020, and just how brutal the wave of consolidation would be.
Estimates would range from ‘a lot’ to ‘just a few big ones’ to ‘another gin and tonic please, Rupert’.
Year after year the predictions were made, and year after year they proved to be fantasy, not least because the people doing the predicting were often platform chiefs who fondly imagined that consolidation would be the sort of thing that would happen to other people, not to them.
So what happens when the velocity of corporate activity in the platform sector really does tick up? Are we happy? Is it good for the market, whatever that means? Is it good for advice businesses, and what about the client at the end of the line? After all, only one person is ultimately paying for all this.
We have had a chance to find out in 2020 and 2021. It has been a dizzying 18 months or so, in lots of ways, with no end of deals going on.
Smash a bunch of smaller providers together, keep what works, ditch the restThe least vibrant market participants are the big platforms – broadly those with £50bn or more under administration.
They are not taking out the small to medium players. Instead, the medium and smaller shops are combining in an attempt to generate scale and take on the Transacts, Old Mutual Wealths and Standard Lifes of the world.
Of course, there are also straight-up changes of ownership, which give providers such as M&G a relatively ready-to-go platform proposition for its own strategic ends.
In most cases changes of ownership of this type rarely make much difference to advice businesses and clients. As we are fond of saying at the Lang Cat, it is better to have a parent that loves you than one that doesn’t. When greater disturbance happens, it tends to be when replatforming or major technological change is involved concurrently.
This is a concern for the private-equity-backed deals that are so prevalent in the mid-market. You can imagine the PowerPoint slides the private equity guys are working through.
Smash a bunch of smaller providers together, keep what works, ditch the rest, update the tech, improve the operating model and end up with something worth more than the sum of the parts. A five to six-year flip, lovely.
The problem, as all advice professionals know, is that in no way is it anywhere near that simple. Bringing platforms together and changing architecture is an astonishingly complex exercise, and even when everyone is at the top of their game, the potential for disruption is huge.
One saving grace is that the disruption is felt more by advice businesses than by clients. That may not feel like a saving grace to readers, but you are better able to absorb issues than clients themselves.
Genuine issues of hardship do occur: the withdrawal to pay for the important purchase that falls through because it is poorly handled, or the relied-upon income distribution that fails to turn up. But in the main, you do a remarkable job in insulating clients from the slings and arrows of outrageous replatformings.
So if you are facing down a potentially difficult bit of corporate activity, what should you do?
The first thing is not to do anything hasty. Right now we have a full postbag from concerned businesses wondering if they should cut and run from affected platforms.
Our answer is consistent: no one knows anything yet and until you do, the recommendation you gave last year is still suitable. If you want to find another venue, that is perfectly fine, but you need to run to something, not just from something. Apart from anything else, your suitability documentation requirements will demand it.
Probably the only truly coherent way through all of this is to turn 180 degrees and look at it through your clients’ eyes. I think if they were here, they would say that what they want is a safe home for their money, and for you to be able to get them where they need to be. Beyond that, they trust you to do the right thing.
Clients, and you, deserve stability, great administration, a decent price and a provider that gives a damn.
Instability is always undesirable, but only you are in a position to say whether the cost of that instability to your business is worth uprooting your clients. No one said it would be easy.
Mark Polson is founder of the Lang Cat
