Aegon has shown its support for a consolidation of the platform industry and suggested there should be no more than five main contenders to enable a sustainable market.
According to Adrian Grace, chief executive at Aegon UK, it is currently not sustainable to have about 30 platforms operating in the same space and he instead suggested there should be five big platforms that dominate the market alongside a few boutique ones.
Mr Grace told FTAdviser: “With the way the market is going, we will end up with four to five scale platforms and one or two boutique platforms and for the amount of available business in this market this set up makes economic sense."
He added: “To run a platform you need to be investing a base amount every year to ensure sustainability and to provide the enhancements advisers want.
“If you are not investing £20m a year plus in the future of the platform then you are not keeping up with the pace.
"To be able to invest this amount a business needs to have scale and to be able to generate enough revenue to invest in the long term.”
Last month (July), it was reported that Zurich was contemplating the sale of its adviser platform and that Aegon was the rumoured buyer.
Aegon has neither confirmed or denied this but Mr Grace told FTAdviser that if an opportunity presented itself the firm would look into it to see whether it would make strategic sense.
Platform consolidation is already taking place. Aegon itself bought Cofunds for £140m in August 2016. Last October Interactive Investor bought the Alliance Trust Savings platform at a discount price of £40m.
It was announced last month (July) that Interactive Investor will migrate Alliance Trust's direct customers onto its platform but plans are uncertain for its adviser clients.
But last year, Aegon faced a raft of issues with its platform after a botched replatforming of Cofunds started on the May bank holiday weekend and led to issues lasting for several months.
These problems included clients not receiving income payments on time and being unable to sign into the platform.
The company previously said it will compensate clients and suffered an extra cost of £3m in June 2018 as a result of attempting to resolve the issues faced by clients.
According to Aegon’s half year results for the period ending June 30, 2019, published today (August 15), net outflows in the UK have hit £2.6bn suggesting that advisers were leaving the firm's platform following the issues.
Mr Grace said all the problems faced by advisers have now been resolved and the company completed its compensation payments to those affected in January, although it is unknown how much was paid out.
Mr Grace said: “These problems are behind us and now we are concentrating on building additional functionality into this platform.”
In particular, advisers have called for an improvement to model portfolios.