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Advisers warned of 'serious' platform migrations in 2022

Advisers warned of 'serious' platform migrations in 2022

Advisers have been warned to expect “serious” platform migration activity in 2022, after a year full of mergers and acquisitions.

Ben Hammond, platforms director at Altus, told FTAdviser platform migrations were “inevitable” this year as new owners looked to bring their various acquisitions under one roof.

“As a probable consequence of all the M&A activity going on, there will come a time when clients and their assets are going to get moved from one platform to another,” said Hammond. 

“I don’t like to use the often dreaded ‘re-platforming’ term lightly, although ‘upgrade’ is often used, and you’d hope it is just this.

“But it’s inevitable at some point as it just doesn’t make sense for a platform firm to operate two sets of technology with two sets of processes, two teams of people.”

Hammond said operating two separate platforms made no economic sense, which meant if one platform bought another - such as James Hay’s purchase of Nucleus -  or a private equity firm bought two platforms - such as AnaCap's purchase of Wealthtime and Novia - the owners “will be bringing them together as soon as is sensibly possible”.  

“Those are just a couple of examples,” Hammond continued, “but watch out for some serious migration activity in 2022”.

As well as the Nucleus, Wealthtime and Novia deals, 2021 also saw Lloyds’ £390m acquisition of Embark - which had already bought Zurich’s Advance and Alliance Trust Savings - as well as the £102m sale of Parmenion from Standard Life Aberdeen to Preservation Capital Partners, and the proposed £1.5bn acquisition of Interactive Investor by Abrdn.

Just last month, white-label platform provider Hubwise was bought by US technology firm SS&C Technologies.

“Private equity is where a lot of the action is, however there is always the potential for this to become a fatal attraction if you don’t do your market research,” said Hammond.

“Platform margins are often immeasurably small and with some re-platforming projects taking three-five years to complete, and a typical holding period of five-six years, will they ever see payback?”

This echoes thoughts shared by Quilter’s commercial and propositions director, David Tiller, who told FTAdviser in October a “decent proportion” of UK adviser platform M&A has been driven by “desperate buyers”, and “desperate buyers are rarely the smartest buyers”.

Resilience front and centre

A big consideration for platforms mulling migrations will be the requirement for operational resilience - ie the ability to function in times of crisis or if the power goes off - which the Financial Conduct Authority has given platforms until March 2022 to prepare for.

“Amongst other things, they must have a disaster recovery plan in place, something which should always be considered when performing due diligence,” Hammond explained.

“Many such plans were enacted in some form at the start of 2020 and have seen a lot of focus from the FCA over the last 18 months with the issuance of multiple resilience plan-driven questionnaires.”