Platforms must either innovate or consolidate to thrive, but at what cost to the end consumer?
Over the past 20 years, as technology and regulation have changed, platform development and consolidation have followed suit. Take, for example, how platforms had to innovate to respond to Mifid regulation and the introduction of the 10 per cent rule, or how adviser demand has led to greater functionality and product range over the years.
According to Verona Kenny, managing director of intermediary at 7IM, one driving force behind the current spate of consolidation and innovation was the pension freedoms, which came into force in 2015.
She says: "These were sprung upon us and, to date, platforms have not felt the full impact of what this means.
"Platforms have been the way many people accumulate their wealth, but we are now at a tipping point where platforms will be how they decumulate. Effectively, platforms can now support clients throughout their entire retirement journey."
Working with a financial planner, this should then enable their investments to be structured in the most effective way – but in terms of what this means for platforms, "we've only just begun", she adds.
As FTAdviser has reported on numerous occasions, technological developments, consolidation and external events have caused problems for advisers and clients with regard to platform functionality.
Most recently, of course, was the glaring inability of many platforms to respond well to the March 2020 lockdown, meaning service levels were a mixed bag in 2020.
But despite the challenges of Covid, the platform industry has shown a remarkable ability to evolve, tempting both acquirers and consumers with their propositions.
Merger and acquisition activity still seems to be on the cards this year, and platforms are still pulling in the punters. For example, Transact and AJ Bell both cited strong financials in the last quarter of 2021.
IntegraFin, the owner of advised platform Transact, added £1.29bn to its funds under direction between October and December 2021, while AJ Bell recorded its second-best quarter ever for customer acquisition on its advised platform, with 4,690 net new advised customers joining in that period.
So where do platforms go from here? Can they continue to innovate, or will they be forced to consolidate?
It could be argued the development of platforms is at an inflection point, which is why M&A activity has been so strong. Some refer to this as the 'S-curve of innovation'.
According to the Open University definition: "The S-curve shows the innovation from its slow early beginnings as the technology or process is developed, to an acceleration phase (a steeper line) as it matures and, finally, to its stabilisation over time (the flattening curve), with corresponding increases in performance of the item or organisation using it."