AscentricMar 6 2017

Interview: Ascentric's Jon Taylor on platform consolidation

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Interview: Ascentric's Jon Taylor on platform consolidation
Jon Taylor

Further consolidation in the platform industry seems inevitable after years of expansion and with costly technological investment necessary to stay relevant. Last year saw a number of platform providers make acquisitions, with two of the biggest deals being Axa UK selling its Elevate platform to Standard Life, and Aegon buying the Cofunds platform from Legal & General. More may be on the way.

Jon Taylor, managing director of the Ascentric platform, says: “[Most] platforms in the UK are still using the same technology now as they were when they launched, and yet there’s been so much change in terms of what the platform is being used for, the way it’s being priced, regulatory changes like the RDR, and growth. 

“That’s driven a need for some serious investment in technology. There are two headlines in the platform world: one is consolidation and [the other] is spending on technology.”

He continues: “Considering how complex that technology change is has caused a number of organisations to sit back and think, ‘how committed are we to this?’”

Ascentric’s own technology upgrade has already been delayed once, and a full roll-out has yet to materialise. 

Mr Taylor believes the realisation by groups that their platform offering requires significant investment, or as he calls it “a large bill in a relatively low-margin part of the industry”, prompted several platforms to be put on the market.

While he sees this trend continuing, he argues: “What may slow down is the appetite for people to buy them. The reason for that is if you were considering buying a platform, you might want to watch what happens to the ones that have just been bought because that will give you a lot of information about how hard it is to acquire and integrate platforms.”

He explains: “If you look at platform A and platform B, platform A probably has a completely different pricing structure, different products, different product wrappers and ways of holding them, and different data about all of its customers and firms.

“Trying to bring those two things together isn’t just a cut-and-paste exercise; you really have to bring all of the information in platform B and work out how to map that on to A, or vice versa.”

When Mr Taylor joined Ascentric in 2015 from his role as chief executive of Royal London’s Co-op life business, the sector was nearing the end of a period of rapid growth.

“There aren’t any financial advisers who aren’t using a platform now – whereas 15 years ago there weren’t any that were, so your strategy in that market is very different,” he says.

“It’s not about growth and it’s not about making sure you get the biggest portion of that market as it grows. Strategy was something we needed to think quite hard about in terms of where we wanted to play and what we needed to do to make sure we’re successful in that area.” 

For Mr Taylor, Ascentric’s expertise lies with independent financial advice. He notes: “We’re going to focus on the advice sector and the advisers that tend to use us are ones dealing with clients with above average net worth, who typically have quite complex financial circumstances.”

In other words, they need a platform that provides them with the full range of tax wrappers available.

“We’ve come to focus on really high levels of customer service because the expectations of advisers’ clients are extremely high. The advisers need to provide a very good service and they expect their suppliers to do the same,” he explains. 

To this end, the platform is to simplify its charges as of May, a move that is perhaps most notable for the decision to scrap dealing costs for exchange-traded funds and investment trusts.

Another key area for Ascentric has been its white-label business, which entails providing platform administration for businesses including Succession. Mr Taylor describes it as a “well-kept secret”.

“We’ve got a number of those deals in the UK, not every platform can do that and very few can do it with the flexibility we can. 

“Typically, white-label platforms are like Succession – they’re the platform operator and we’re providing the administration. With some of the white labels, we are the platform and it’s just branded by someone else. Not many firms can do both.”

He adds: “That’s something we want to focus in on. Probably a third of the assets on the platform at the moment are through white labels.”

Another aspect of white labelling is being able to manufacture products on the platform, prompting Mr Taylor to refer to platforms as “the ultimate Swiss army knife”.

“It’s a very flexible way of managing different forms of investment in different tax wrappers, then reporting on it and managing the flow of either adviser or client fees, then putting that across through information attuned to the adviser or client,” he points out.

“If you’re trying to manufacture something that involves some investment and some reporting – that might generate some income and needs to sit in a tax wrapper – why would you build it any other way than on a platform?”

Ascentric is also considering how it might better utilise being part of the Royal London Group. Mr Taylor says: “We’ve got a very good asset manager in RLAM and it is focusing much more now on the retail market. It has hired Trevor Greetham and his team, looking at multi-asset products.

“What would products look like if we used the Ascentric capability and the multi-asset capability in Trevor’s team within the long-term savings market, with RLAM a brand that has such a good reputation among advisers?”

While this is still a work in progress, it hints at where Ascentric might go next as a business. 

Adviser use of platforms is changing, with many advisers now trying to draw together all the different technology they use to provide a more efficient service. This will be vital if advisers are to appeal to a younger generation of investors and savers who already use technology in their daily lives.

“Clients pay a fee for advice. Your interaction with the adviser is quite infrequent – you might see them once, maybe twice, a year. If you’re a high-net-worth client, you might see them quarterly,” Mr Taylor explains. 

“So you’ve got something that doesn’t happen very often and it’s charged for at the point you interact with the adviser. If you contrast that with everyday digital use, you’re typically paying nothing and then only start paying once you’ve got used to a service, or you pay per use.”

Inevitably, the conversation turns to ‘robo-advice’. Mr Taylor stands by the need for financial advice for more complex clients and does not believe robo-advice will “automate that away”.

Instead, he believes it may be more suited to those with more simplistic financial needs. “If you go to the mass-market end of the spectrum, you might have somebody who is in a workplace pension and making investments over and above cash. The opportunity there is very real in terms of robo-advice,” he says. 

“That’s an area where the requirements are very simple. Understanding what the client is looking for is quite straightforward, mapping that into some kind of recommendation is also straightforward and I can see that growing.

“There’s a role for robo-advice – I hope it will be embraced by advisers who use it to add value alongside what they do, but I absolutely believe there will always be a role for advisers.”