The growing trend in platforms transferring their employees to tech providers will accelerate the growth of adviser white-labelling and ‘adviser as platform’ solutions, according to experts.
Recent deals mean tech provider FNZ will soon have absorbed nearly 900 staff previously employed by its platform clients, as more platform operators look to outsource both their administration and core technology.
So far, Abrdn and James Hay have ‘tuped’ - which means ‘transferred undertakings of’ - employees from themselves to FNZ.
Abrdn has transferred 427 of its colleagues to FNZ so far, while FTAdviser understands James Hay has tuped some 450 employees.
In the outsourcing market, tuping is a legal obligation which means staff have to follow the work if it moves. “They can then be made redundant on their previous employer's terms, but there isn’t a ‘choice’ as such when it comes to tupe,” Alpha FMC’s head of retail distribution and advice, Bradley Northrop, explained.
Industry experts have said they are not surprised by the direction of travel, with FNZ being “one of the first movers” in the platform market to deliver both the software and administration services to platforms.
They have also said platforms tuping employees to the likes of FNZ could bolster their white-label offerings. Embark, which uses FNZ's technology to run its platform, has branded white-labelling an "important" part of growing its retail arm.
"For the industry, [tuping] can strengthen the ‘platform as a service’ model that may attract more brands to white label a solution, or for advice firms to move to the ‘adviser as platform’ solutions," said investment platform director at Altus, Chris McCullam.
"Firms like FNZ will build the operational scale to service more and more customers – especially as they acquire other business to fill gaps in their capability or meet specific client/product demand."
FTAdviser approached Embark, as well as FNZ's other two clients Quilter and Aviva. The latter two said they have not tuped any employees.
Embark declined to comment, but FTAdviser understands no employees have been tuped.
Abrdn said it has been tuping employees to FNZ over the past couple of years. The platform has also handed over all its back-office processing to FNZ.
“Most advisers still deal with the same teams and will not have seen any difference in how they deal with us." the platform said.
FTAdviser understands as part of James Hay’s outsourcing arrangement it signed with FNZ in June 2021, the platform will tupe around 450 of its employees.
Currently, most platforms oversee their administration in-house. Despite this, one platform told FTAdviser they think “more might consider the [tuping] model”.
There has been a wave of platform providers moving into the white-labelled, or customised, adviser space in recent years including Fundment, Seccl, Platform One, Multrees and Third Financial, which all offer variations on the customised ‘white-label’ offering.
These providers, all of which operate their own in-house technology to varying degrees, have been bringing innovation to the platform space.
Last week, Fundment told FTAdviser it had introduced more fee flexibility, allowing advisers to set different fees for individual clients and accounts.
Fees can be set either as a percentage of assets or as a fixed amount. One client might agree to an annual fixed fee with their adviser, while another client might agree to a percentage charge for one wrapper, and a fixed fee for another.
‘We will see more of this’
Despite spiralling interest rates increasing the price of debt, platform providers such as Nucleus are still on the hunt for acquisitions.
Alpha FMC’s Northrop said increased consolidation of underlying systems and infrastructure which power the UK platforms market, and in turn an increased level of outsourcing for core commodity operations, tuping will become more common.
“Retention of experienced staff within the future operation of the outsourcer has its positives,” Northrop continued.
“These individuals can help a platform safely navigate the transition, retain the voice of the platform provider and shape the culture.
“The overall trend of outsourcing should lead to greater commoditisation of core platform processes and lead to greater standardisation and efficiencies within the adviser platform market.”
“In addition, scale and efficiencies should lead to a lower cost for platform providers which in turn can be passed onto the end customer,” he concluded.
But Northrop acknowledged some of the drawbacks of the model, stating one was that the arrangement may be short-term and lead to further restructuring.
Another was that it can risk staff leaving.
Tuping could ‘diminish’ platforms’ knowledge
Tuping is not a new phenomenon, according to Altus' McCullam.
He told FTAdviser the tuping of people across to FNZ as the provider wins more clients “is the same direction of travel that has been happening in the wider investments industry for some time".
He explained: “Provider firms have been moving books of business to the likes of TCS/Diligenta, Capita, Atos, or Equinity as part of replatforming and business process outsource deals to update technology and address operational costs.
“FNZ was one of the first movers in the platform market to deliver both the software and administration services to providers. This started out as custody and investment administration, but has moved into a broader customer and wrapper administration solution.”
McCullam said with a common underlying technology platform, there is opportunity for FNZ to improve automation and efficiency for common back-office processes which can then be applied across all the firms they serve.
FNZ does this because it needs developers to work on its various projects. Bella Caridade-Ferreira, FundscapeOne challenge McCullam presented by tuping is it “often means the level of knowledge retained within their business diminishes”.
This, he said, could be cause for concern as they are still the regulated entity and carry accountability for their material outsource.
“This can also cause a challenge when trying to implement change and think strategically, as you are even more reliant on what your third party is telling you and their ability to deliver,” he added.
Fundscape chief executive Bella Caridade-Ferreira agreed that platforms which decide to tupe employees will have less control overall.
“But that is the conscious decision they have made by outsourcing to FNZ,” she continued.
“It also means that those employees will work on other projects and not just their own. FNZ does this because it needs developers to work on its various projects.
“FNZ’s business model is to work closely with platforms and help them reduce costs and de-risk their balance sheets. One way to do that is to take on their staff.”
ruby.hinchliffe@ft.com