I’ve been writing this column for four years or so, and what with one thing or another I’ve been in and around platforms for a little over a decade, maybe a decade and a half if you include workplace pensions and employee benefits technologies. I’m casting around for a more tumultuous year, and the only one I can come up with is RDR, or perhaps PS13/1. That makes this the most important 12 months in platforms for at least five years. And not in a good way.
I think the year splits into three big themes – replatforming, corporate activity, and regulation. I’ll hit them one by one. I’m afraid there won’t be as many jokes as usual, mainly because too much of what’s happened this year isn’t funny.
Replatforming
This has been the year that replatforming broke, or possibly that broke replatforming. I’m not into kicking those who are already down, but we can’t let the unfortunate twins of the Aviva Platform and the Aegon Platform (seriously, we can surely do better than these names, how about we crowdsource it? The latter is known at Lang Cat towers as ‘The artist formerly known as Cofunds’) go without a mention. Both platforms have, for different reasons, had a nightmare, and both are on the long, slow climb back to some sort of equilibrium.
And they’re not alone – Quilter (formerly Old Mutual Wealth) is still in build with FNZ after last year’s aborted £330m spend with International Financial Data Services, and this year we saw Kleinwort pull out of a £40m build. I don’t know how much money has been wasted on either aborted or mishandled replatforming projects, but it’s a lot, and is probably one of those complicated ‘-illion’ words Steve Bee talks about.
It is a source of amazement to us that these projects continue to be so poorly executed. It’s easy to blame the technology providers, but that’s not good enough. Every tech firm has instances of their system working fine elsewhere. The truth is that when good – or at least acceptable – tech meets bad business process, there is always going to be an unholy mess.
I’ve met too many people who have no earthly idea how the proposition decisions they make in the project room with all the brown paper and Post-its on the walls will actually impact clients. Almost every provider believes it can out-manufacture its way to greatness. Almost every adviser firm says they just want the provider to do the basics very well, every time. The mismatch is obvious and untenable.
The issue starts in the boardroom and flows downstream from there. Of course, projects need to be pushed and there are corporate milestones to reach, but an uncomfortable board meeting is surely better than the chaotic inferno of nonsense that follows when you launch an investment platform before it’s ready.
Chief executives and senior teams, hear this: pulling the trigger and going before your business is ready will punch a massive black hole in your world for at least three years. Any face or money you save at the start will be chump change compared with the remediation you’ll need to put in place. Heads will end up rolling; maybe even yours.
I’ve been looking at a great concept called F***-Up Nights (you can find a website all about it). This is a group – operating in hundreds of cities all over the world – where tech and business people meet up in order to talk openly about things they’ve...messed up, and how they wish they’d done things differently. From what I hear the nights are funny, emotional sometimes, painful, and incredibly instructive. The idea is that learning from others’ painful experiences helps us all move forward.
In our sector, where the stakes are so very high for clients and advisers, I’d love to start one of these nights with the express intention of ensuring no clients ever have to go through what people with holdings on Aviva and Cofunds have had to. But there’s no point. No one will come, lest they give a rival some sort of competitive advantage.
And we go round the sun again, and we never learn.
Mergers and acquisitions (and listings)
The platform market used to be sclerotic: jammed up and impossible to do much with. Then, after Elevate and Cofunds changed hands in the past couple of years, there was a sudden flurry of activity.
Quilter, Transact, Nucleus and AJ Bell all managed successful initial public offerings – although adverse markets have hit the first three since floating, with only Transact above the IPO waterline at the time of writing. AJ Bell has had a great start, but it’s a long old race.
Away from floats, a long-term parlour game called ‘Guess who’s going to buy Alliance Trust Savings’ came to an end, with Interactive Investor doing the deed, though all is yet to work its way through.
I think this is a great fit – Interactive Investor is also a flat-fee champion and has some chops on difficult integrations as a result of the TD Direct merger. How the ATS advised book fits the second-largest direct-to-consumer platform in the UK is a different matter. Whatever happens, I hope very much that ATS stays around in one form or another.
The market needs choice, and if ATS or its subsequent incarnation can offer most of what other platforms do, with reasonable service at a fixed fee that’s a fraction of the price of the big guys, then I think there is a business there to invest in.
Beyond this, interest is mounting in a potential acquisition or float of True Potential. Although it’s not a platform operator, FNZ (the platform tech provider to Standard Life, Aviva, Barclays and more) was bought by Al Gore’s Generation fund, with a value of £1.7bn. This sector may not be as sexy as tattoos-and-beards fintech, but it hasn’t escaped the attention of our capitalist overlords in their smoke-filled rooms.
Regulation
I checked back to my end-of-year column from 2017, and much of it was about Mifid II. So that happened, along with Prod, our new Mifid-y rule book, and to a large extent everyone kept doing what they were doing before, which is sort of all right and sort of not.
This time last year we were all freaked out about the 10 per cent drop rule. “Pah!” said the guys who prove the future by showing occurrences of things in the past. “Such things are a once-in-a-decade, maybe a once-in-a-generation event! What a waste of time! What a bunch of loooooosers!’
Well, all those who said 10 per cent portfolio drops were a once-in-a-generation event now have a whole generation to be nervous in, as the first batch of drop alerts went out in October. Life comes at you fast.
The next instalment will be ex post disclosure, which is good because it’s in Latin. This is the part that will show clients how much they’ve paid – in actual pounds – for your advice, for the platform/product and for the investment in the past year. It could be very powerful, probably not in a good way for those interested in keeping prices high.
However, if that’s you then you can relax, as based on our work the implementation of it is shaping up to be the regulatory version of that bit in Apocalypse Now at the Do Lung Bridge. Everyone’s doing different things in different ways at different times. One despairs.
Finally, the FCA’s Investment Platforms Market Study published its interim report in July. It was a pretty tepid affair, which successfully identified that kittens are indeed fluffy, birds do indeed suddenly appear whenever you draw near, and that rhythm is a dancer. What it failed to do was to identify that the D2C market is fundamentally different to the advised one, or get ripped in around vertical integration in a way that would have satisfied those of us who are worried about client outcomes in that corner of the shop. We live in hope.
And that was it for 2018. I hope you were relatively unaffected by the messes going on. As a sector we can and must do better in 2019.
Unless someone tells me to stop, I’ll be here each month cocking an eyebrow at it all. See you then.
Mark Polson is principal of the Lang Cat
