Long Read  

A new approach to platforms

A new approach to platforms

Recent years have seen the convergence of advice in the UK wealth management sector, as stockbrokers and wealth managers continue to add financial planning capability. 

At the same time, traditional financial advisory firms have added investment management capability to their client propositions.

All this is well and good, but how are service providers to the sector reacting to this change in the landscape?

One interesting development is the arrival into the UK wealth sector of the type of service provision that just 15 years ago was only in the domain of institutional asset managers looking for solutions to help them scale their global businesses.

These huge global firms created a demand for middle and back office operational outsourcing solutions, initially filled by the major global custody banks.

Then as operational outsourcing matured, specialist firms became competitors in this space. Some of these specialist providers of operational outsourcing services matured their services to the extent that they were able to be deployed within the private client investment management sector.

The specialist outsourcing services have allowed private client investment managers to scale their businesses while also enabling them to focus on client service, and maybe more importantly, being seen as the sole trusted wealth brand to those customers.

Contrast this to the traditional approach taken by adviser firms, where the old-fashioned ‘adviser as broker’ model led to customers having multiple relationships with multiple brands, across investments, tax wrappers, and retail investment platforms, diluting the brand of the adviser.

The UK adviser market is going through a major transition with the entry of more and more consolidators into the market buying up the small regional players. Every independent financial adviser firm of size will have been contacted by a number of these consolidators, probably getting approached on a weekly basis, with offers to buy them out.

Consistent and professional service

However you look at it, scale is the future for adviser firms. But scale is not the optimal answer on its own. The other objectives of enormous significance are to drive operational efficiencies into the business and to provide a consistent and professional service to their clients. 

In recent years the obvious solution for smaller adviser firms looking for an efficiency in operations was to go to a ‘platform’, which would claim to bring in those efficiencies, and indeed it has to be observed that platforms have taken over much of the retail investment market in recent years.

The problem with this solution is that you take what the platform offers, not what your business wants and needs, and you have to shape your business around their solution, not them meeting your requirements.

The other problem is that adviser firms would often adopt more than one platform as they believe that is what the Financial Conduct Authority demands, but the obvious flaw, despite the fact that the FCA has never made that demand, is that this doubles up and complicates their own business effectiveness and puts on a lot of cost to the adviser business.