FNZ’s growing share in the outsourced platform market “could increase costs” for rival platforms using its technology over time and spark “queue[s]” for updates requested by advice firms, according to an analyst note.
Earlier this week, the analyst arm of investment bank Liberum said FNZ had approximately a 30 per cent market share.
The technology provider underpins Quilter, Embark, James Hay, Abrdn and Aviva. Liberum said all these platforms could be vulnerable to price rises if FNZ were to attain “significant market share”.
“FNZ continues to take share in the outsourced platform software market, which could increase costs for competitors using its software over time,” Liberum said in its note.
“Given strong demand for FNZ’s services, there may also be a queue before advised firms can implement the updates they want.”
The analyst note added that if a significant part of the market is using FNZ, and the provider rolls out a new update that advisers do not like, it would have “a negative impact on a large part of the market”.
FNZ, which technically provides technology and infrastructure rather than software, secured a $1.4bn (£1.2bn) investment in February from asset manager CPP Investments and private equity firm Motive Partners, valuing the company at over $20bn (£17bn).
Liberum said FNZ’s “sheer scale” is one of its big advantages over a platform like Transact, which owns its technology and does not use FNZ.
The analyst note did, however, suggest this year’s struggling markets have somewhat tempered shifts in platform market share on an individual adviser level.
“We believe IFAs tend to employ a stand-offish approach during periods of market volatility to avoid panicking their clients,” it said.
“We expect this could therefore reduce the likelihood that advisers switch their client books to entirely new platforms when markets are volatile, where time out of the market could lead to a significant opportunity cost in terms of foregone returns for clients.
"[This] could therefore possibly reduce flow growth for those platforms more reliant on new advisers.”
Last month, national advice firm Fairstone confirmed to FTAdviser it will be launching a new platform with FNZ in the final quarter of this year following reports of the deal.
Revelation of the deal struck a chord with the sector, marking a change in behaviour for FNZ - a firm which has always dealt with platforms rather than directly with advice firms.
FTAdviser spoke to experts across the industry to find out why Fairstone might have gone with FNZ.
At least three said price formed a big part of the appeal, with two confirming deals of around 5 bps plus implementation and ongoing charge costs.
Compared with the rest of the platform market, 5 bps is the cheapest - at least half of the price of the next cheapest competitor, Seccl, which charges 10 bps. Meanwhile, Multrees charges 15 bps, and Fundment charges 25 bps.