The chief executive of Transact's parent IntegraFin said: “At the moment you have a market that is working on mid-20s to 30s basis points and people are saying someone like a Google or Amazon could come in and do it on five basis points, in theory, on a spreadsheet.
“But in terms of the real world, where you are trying to make money and help the customer move their pension plan from one place to another, I cannot imagine how it would work.”
Banks have also been mooted as being a potential threat to the platform market, but Mr Taylor is sceptical.
“Banks are well positioned to start muscling their way into the vertically integrated market again because of their scale and coverage,” he said.
“The irony is they have done it [in the past], then they stopped doing it. [They] forget all about [what made them pull out], then they start doing it all over again. I am not worried about these sorts of models because they will not be able to do what we do.”
Continuous worries
However, the usually unflappable platform boss does worry that anything that removes complexity – as platforms make their money by making complexity easier to manage – is a potential threat.
Mr Taylor said: “If the government was to get rid of all tax wrappers or have just one, then that would take away part of our raison d’être. Or, if the UK public stopped buying funds and shares and just held cash, then that would also add a simplicity we’d struggle to help with. To a degree both those things are already true for people who have very little by way of savings and that little is held only in cash accounts. I’m not convinced either is likely to become universal.”
But Mr Taylor is excited about the future as Transact gears up for an initial public offering (IPO) in March. The company has not disclosed how much will be raised, but the offer size is expected to be 25 per cent of IntegraFin’s share.
The platform boss said the main reason behind the move is to fulfil a promise he made 18 years ago to early investors in the business. But the timing does coincide with a period in which platforms are growing and advisers are more clued up on what they want out of the model.
He said that it also feels like the right time to do the IPO because of Transact’s recent performance in a record year of growth. The firm’s post-tax profits leapt by 43 per cent to £30m for the year to 30 September 2017. Gross inflows rose by 49 per cent to £5.3bn and net inflows increased by 66 per cent in the same 12-month period.
Mr Taylor added: “We have ridden through [the dotcom boom and global financial crisis] and made a profit in every one of those years, but there was always something important to be getting on with.”
Staying independent
The market reaction to the IPO plan has been largely positive, although a note from a Platforum analyst last year raised concerns about the impact on Transact’s “independent” status in the future.
The platform analyst said: “We’ve been asked by several advisers about the implications of the IPO; it could prove a good thing for Transact and its customers. Most importantly it will provide shareholders with the ability to trade shares if they wish, with a market price for those shares. We worry about the inevitable consequences of being a listed company and the impact on culture and Transact’s unique selling point of independence.”
But Mr Taylor said that the independence of the business would not be compromised and added he envisaged no disruption for advisers.
“There are a number of ways we discuss our independence,” he said. “We are not vertically integrated, we have no asset management interest and we do not own advisory businesses. We own our own technology and that makes us independent, so we do not have to work with any third parties to figure out what to develop next.”
Mr Taylor said Transact’s other key selling point was that its model is driven by client-facing advisers backed by technology, rather than the other way round. “The importance of planning, particularly in terms of intergenerational and tax, has become more important than trying to pick the next star fund manager,” he said. “There are all sorts of different models out there, but if people have no point of difference, it is very difficult. You can differentiate yourself on price, which is when people start to be driven to be a commodity business than a quality service business.”
Transact's long-term strategy of lowering fees still might not make it the cheapest, but Mr Taylor has no problem with that as long as the business is providing good value. The firm's hesitancy in buying-up other firms has helped it win over clients, he said.
His comments are backed by research from Platforum, which found that when advisers select a platform they look for a long-term business partner. The hassle of switching or transferring between platforms is significant, and they also do not want to recommend a platform that then gets bought. Transact might not be in an acquisitive mode, but it has no plans to stand still.
Ima Jackson-Obot is a features writer at FInancial Adviser
Ian Taylor's career highlights
2002 – present: Chief executive, Transact
1999 – 2002: Co-founded Transact
1992 – 1999: Marketing head, John Govett & Co (latterly AIB Govett Asset Management)
1987 – 1992: Marketing development manager, Royal Life Group
