Advice firms are becoming “increasingly realistic” about the potential revenue they could generate from owning their own platform, with few firms ready to adopt the alternative model, according to the Lang Cat.
Insight director at the Lang Cat, Steve Nelson, said at first glance, the ‘adviser-as-platform’ model offers an advice firm the chance to diversify its income stream by taking a platform charge as well as an advice fee.
Smaller platform providers such as Hubwise, Seccl, Third Financial and Platform One all offer variations on this model, while more established providers such as Embark and FNZ are also offering the service directly to networks and national advice firms.
Larger IFAs, such as Fairstone, Ascot Lloyd and Atomos - previously Sanlam Wealth - have all signed up to using the model for parts of their businesses which typically sees the advice firm taking on platform permissions and running as a restricted proposition.
However, the Lang Cat has found more firms are being “realistic” when it comes to the extra responsibilities which come with platform ownership, and how these would deter from any potential revenue stream this model offers.
“We observe a shift in sentiment from the market compared to, say, two years ago,” said Nelson.
“Firms are increasingly prescient of the additional responsibilities, risks and costs associated with an alternative model.
“Needless to say, an alternative model requires significant analysis, planning and resources to satisfy regulations of being a platform as well as advice regulations.”
Nelson said firms now tend to understand this and that in simple terms it is evident “few firms at present have a combination of the correct appetite, infrastructure or skillset to adopt an alternative model”.
At the end of 2021, NextWealth’s chief executive Heather Hopkins said appetite among advisers when it comes to operating their own platforms had begun to “dry up”.
“People are looking at it, getting further down the road, and questioning operational costs and benefits for the business,” Hopkins said at the time.
To operate their own platform, advisers must take on a new set of regulatory responsibilities - regardless of whether they’re an appointed representative or a direct operator with their own permissions.
This is unlike a ‘reskinning’, sometimes referred to as a form of white labelling, which sees advisers use a platform like Aviva’s with the addition of their own brand on the dashboard - all the while Aviva oversees it.
Some technology providers are trying to make the ‘adviser-as-platform’ model more attainable for smaller firms.
JustFA, a digital advice and investment platform provider, has gone live with over 35 IFA clients this year and is currently in the process of onboarding a further 28.
The provider’s business development manager, John Driscoll, told FTAdviser customised platforms and digital advice journeys should not just be options for the UK’s largest IFAs.