And second, it demonstrates that this is a ‘mainstream’ trend that extends beyond the very largest of firms or national networks, which manage several billions in client assets. Thanks to emerging technology, even smaller firms have been able to get a piece of the platform action – taking on some of the responsibilities themselves in return for the additional control that it brings.
But before going any further, what exactly do we mean by ‘launching a platform’? Let’s start by unpacking the various options in this space.
‘White labelling’ a platform
Just like ‘launching a platform’, the term ‘white label’ is often used without definition to refer to one or other of a variety of quite different approaches.
Sometimes, it is used solely in relation to branding, to mean the act of distributing an existing platform offering under your own brand identity (and, strictly speaking, this is the only proper definition). This is an option that many traditional platforms offer, and often for free.
Increasingly, though, it is taken to mean something a little bit more advanced than that; a chance to exert control over more than simply the cosmetic. This might mean changing the pricing, or altering the terms on which the platform services are offered. For want of a better phrase, we might call this approach ‘white label plus’.
It does not, however, alter the legal basis of the relationship. The client will sign a contract with the underlying platform provider, who will continue to perform all the services involved in the delivery and administration of that platform.
Operating your own platform
Both of these ‘white label’ approaches differ from ‘platform ownership’ (or ‘operating your own platform’), for a few reasons.
The first is legal. Under a white label model, the client still signs terms with the third-party platform, no matter how it is branded. Put another way, when it comes to the platform services that they receive, they are the platform’s client, not the adviser’s.
If that platform chooses, for example, to change underlying technology provider against the wishes of the adviser – as can happen following an acquisition – that adviser is powerless to do anything other than recommend a different platform to the client (which would entail a lengthy suitability and re-papering exercise).
But under the ‘platform ownership’ model, the advice firm or DFM owns the client relationship in full. They will likely rely on a third party for the core platform infrastructure – typically custody, client money and the technology to power the trading and settlement of investments – but they will now be responsible for the platform administration, under a separate agreement that they sign directly with the client.
