The advised platform market has used Hargreaves Lansdown’s success to justify the mantra “if you're not making a 50 per cent profit margin then you're not at the races”, according to David Ferguson.
The Nucleus founder and incoming chief executive of white-label platform provider Seccl told an audience at Lang Cat Live yesterday (February 10) that the platform market should consider cutting its profit margins and investing more into their businesses.
"There definitely seems to be a thing in the platform market, possibly led by Hargreaves Lansdown's great success, where it's become accepted that if you're not making a 50 per cent profit margin then you're not at the races,” said Ferguson.
“And maybe instead of making a 50 per cent profit, you'd be better to make 40 or 30 per cent and invest a bit more as you go."
FTAdviser approached Hargreaves Lansdown for comment.
Asked who in the platform market were the allies and enemies of financial planners, Ferguson said it came down to which firms were and weren’t aligned with information and aggregation.
“You can see it run through the way companies conduct themselves. You can see it through the way they think about pricing,” he explained.
“There’s enormous information asymmetry in this market. There’s also enormous aggregation asymmetry.
“I always struggle with things like pricing models, where a firm will say ‘we charge X, that’s our headline price, and we also charge this if you do drawdown, and this if you take an income payment with your statement, we take a margin on cash’.
“No-one adds up those little things at the client level, because it doesn’t matter, it’s like £20, or only £50 there.
“But actually the aggregation asymmetry is that the corporate makes a load of money on that stuff.”
In recent years, Ferguson argued platforms had made almost half of their profits off charges such as interest on cash. “I suspect that’s not terribly clear when they promote the price and the proposition.”
But for financial planners, this lack of transparency around the total sum of platform charges is simply making their lives more “awkward”, according to the Nucleus founder.
He continued: “All that’s doing is creating an awkwardness somewhere for financial planners down the track. If someone works this out, that instead of paying 30 basis points for a platform when I’m actually paying 36.
“There’s an honesty and a truth in financial planning that is strongly echoed in some of the technology providers or asset managers. And then there are others for whom that line doesn’t run quite so true.”
Ferguson argued that those providers on a financial planner’s side are those who actually see themselves within the same value chain.
“If you look at who the allies are here, it’s got to be people highly aligned on values, and who recognise ‘I’m actually in your supply chain, I work for you’.”
Ferguson concluded by questioning financial planners on pricing changes which have impacted them and their clients: “Were you consulted on it? Did anyone care that you were bothered about it? That’s pretty fundamental.”
ruby.hinchliffe@ft.com
