Platform 

Shaking up the competition: Wraps & platforms survey

  • Gain an understanding of the current market
  • Learn about the challenges faced by providers
  • Grasp how regulatory changes could reshape the industry
CPD
30min
Shaking up the competition: Wraps & platforms survey

If the big theme in the platform market last year was consolidation, then this year things have swiftly moved on. Advisers using the two major platforms that were acquired in 2016 – Cofunds and Elevate – were left with decisions to make: primarily to ensure clients are not left disadvantaged by the switch, and that their decisions remain suitable. 

Intermediaries appear to have had few overt concerns on this front, leaving the coast clear for other issues to surface in the meantime. 

In the six months following the previous survey, the focus was firmly on technological travails, as a number of providers grappled with rapidly expanding costs and delivery timelines. Research by consultancy firm the lang cat, released in April, found that the cost to move assets to a different technology provider is £260 per client. That is more than double the £117 per client in revenue that it estimates platforms make each year.

Now attention has turned to the regulator’s decision to follow its asset management market study with another looking specifically at platforms.

It is set to embark on a mission to pick apart costs in the platform market – a move that has added intrigue given Vanguard’s recent low-cost launch that threatens to spice things up in the direct-to-consumer (D2C) arena at least.

On the charge

The watchdog has said it will aim to understand “how D2C and intermediated investment platforms compete to win new and retain existing customers” and “explore whether platforms enable retail investors to access investment products that offer value for money.”

It follows what the FCA described earlier in the year as an inherent conflict for adviser platforms: they are selected by, and usually used by the adviser, but paid for by the retail customer.

Providers appear relatively unfazed though. “We welcome the study,” says Barry Neilson, business development director at Nucleus. Mr Neilson adds, pointedly: “Platforms offering a vertically integrated approach are most likely the ones that will be of most interest to the FCA and this research.” 

Bill Vasilieff, chief executive at Novia Financial, suggests anything helping to create better value for consumers must be viewed as positive, but is more cautious on this front. 

“Implying that platforms will be able to influence the price offered by an asset manager could be challenging when there are numerous platform propositions currently offered, for example, open architecture versus guided architecture.”

With these issues to deal with, it is unsurprising that predictions of a slowdown in merger activity have come to pass. 

AJ Bell’s marketing director, Billy Mackay, explains: “Providers, investment firms and advisory firms [are] looking to break into the different parts of the value chain as an alternative to simply growing their existing business models.”

Rather than the combination of existing players, it is the arrival of new competitors that has attracted attention this year. Vanguard’s venture in the UK market has caused a stir, even though its offering is purely D2C.  

Annual costs of just 0.15 per cent, in addition to ongoing fund charges capped at £375 per annum, “will pile further pressure on the old-school asset managers,” according to Mr Neilson.

Comments

CPD
30min
  1. Mr Neilson says which platforms are most likely to come under scrutiny in the FCA's market review?

  2. It states the rise in AUM over the past 12 months can largely be attributed to what?

  3. Despite facing scepticism in the past, which products are now an integral part of most provider's offering?

  4. According to Mr Neilson, Vanguard's arrival is unlikely to affect advisers for what reason?

  5. Mr Wilson says what should reduce over time?

  6. Vanguard's D2C offering will pile pressure on who, according to Mr Neilson?

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