In Focus: When Clients' Plans Change  

How platform changes will affect your clients

  • To understand why platforms might consolidate.
  • To keep on top of innovations in platforms.
  • To be able to help clients choose the right platform for them.
CPD
Approx.40min

If innovation can only go so far, is consolidation the only way to go for platforms?

After all, there has been significant M&A in the past few months, such as James Hay buying Nucleus last September, and FNZ being forced to sell GBST to Anchorage Capital Partners over competition concerns.

Should advisers be teeing clients up for more big-name purchases in the investment platforms industry this year?

David Tiller, commercial and propositions director at Quilter, is not convinced by all the M&A activity. He says: "Consolidation in the platform space has largely been driven by desperate buyers.

"Buyers are desperate because they’ve seen how resilient the platform market has been since the start of the pandemic, and we’re seeing firms that have historically operated as a wholesale business seek to fast-track growth through M&A activity.

"The firms that have historically operated as wholesale businesses have struggled to gain access to customers and so M&A is seen as the answer."

However, he adds: "Desperate buyers are rarely the smartest buyers, and running a platform is a very different proposition than anything in the wholesale space."

Patrick Mill, chief executive of Novia, says it is too soon to claim platforms have nowhere to go now but consolidation. 

He notes: "Consolidation is likely to be an important feature going forward, but it shouldn’t be at the expense of innovation."

According to him, while financial planners become more innovative and "radical" in the range of services they provide, so too must platforms "respond accordingly" to remain relevant to their audience.

So does he feel that there is plenty of wriggle room on that so-called S-curve?

Mill adds: "With more than £560bn on retail advised platforms, it’s safe to say they are firmly established. And with projections of this growing to more than £1.4tn in the next five years, there seems to be no evidence of a slowdown in growth or momentum."

Tiller states it is "outrageous" to suggest innovation has stagnated. 

He says: "Innovation is an evolutionary imperative that remains in our DNA, so to suggest this will just stop is pretty outrageous.

"Innovation is being fuelled and accelerated by new and ever-evolving technology. In this fast-paced digital environment, if platforms want to remain successful and relevant, they must improve their technological offerings."

Andy Back, chief commercial officer at Multrees, agrees. "Innovation never stops; it is a constant, and always will be. Advisers need to be agile and investors expect innovation as the technology they use and the technology landscape around them continues to change."

According to Mill, innovation will "continue to be a priority for those platforms that see value in helping financial planners successfully scale their advice processes", although he adds that "not all do".