While some upgrades have gone through already, Andy Bell, chief executive at AJ Bell, notes that further migrations are on the horizon. “The platform market has reached a stage of maturity where many technology systems need upgrading and consolidation of providers has started to happen,” he says.
“The inevitable transfer of clients on to new technology platforms is leading to a significant level of disruption at some platforms, which may be the catalyst for advisers to decide to move blocks of clients to a better value and more suitable platform for their needs.”
Another theme that has started to gather pace during the first 10 months of this year has been initial public offerings. Four companies have either already publicly listed or revealed plans to do so.
Transact’s £650m flotation was finalised in February, sparking others into action such as AJ Bell, Embark and Nucleus. Old Mutual’s platform, meanwhile, was spun off from its parent as part of the newly rebranded Quilter set of businesses.
In September, AJ Bell announced that plans were already under way to follow in Transact’s footsteps, with completion expected around the turn of the year, whereas Embark has targeted 2020. Such a glut of current and potential activity on this front suggests platforms believe they will play an integral role in retail financial services for years to come.
Cost overhaul
But further changes to the landscape are forthcoming in the form of regulation. In June, the FCA published the interim report of its platform market study, almost a year to the day after first announcing intentions to “explore whether platforms help investors make good investment decisions and whether their investment solutions offer investors value for money”. The watchdog identified five key issues:
- Those who may benefit from switching but are finding difficult or costly.
- Difficulties on choosing D2C platforms based on price.
- The information provided about model portfolios makes comparisons challenging.
- Consumers with large cash balances are unaware of capital erosion risks.
- Orphan clients struggling to alter their investments.
A number of remedies have been put forward, with the regulator now seeking feedback before publishing its final conclusions next year.
Mike Hogg, head of proposition strategy and planning at Standard Life Aberdeen, supports the regulator’s outcomes and suggests significant work needs to be undertaken by both providers and advisers to ensure value is clearly communicated to consumers.
“Services such as portfolio rebalancing and bulk switching are designed to enable advisers to efficiently deliver regular portfolio reviews for large numbers of clients, reducing the risk of portfolio drift and facilitating rapid changes when market condition or fund performance dictate,” he says.
