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.
Few firms at present have a combination of the correct appetite, infrastructure or skillset to adopt an alternative model.Steve Nelson, Lang CatLarger 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.
Its clients include firms such as Lancashire-based Becketts Financial Services, Kent-based H&D Wealth, and Scotland’s Lowland Financial.
The provider uses Seccl for custody, offering Sipp, Gia and Isa tax wrappers as well as four model portfolio ranges.
The platform is co-branded rather than fully white labelled, and is linked to a back-office system, client portal and digital advice journeys.
“We are bringing democratisation to digital wealth so smaller firms can fight back,” Driscoll said.
Providers weighing up hybrid offerings
Last month, Nucleus revealed to FTAdviser it was “looking closely” at giving advice firms “greater propositional control” in response to the rising popularity of white label and customised platform services.
The platform’s chief commercial officer Alex Kovach said that while the ‘adviser-as-platform’ model does have its downsides, he can also appreciate the business opportunity.
While NextWealth and the Lang Cat reckon the appeal for platform ownership amongst advice firms is still small, other consultants have anticipated an “accelerated flip” to custom platform models.
Kovach said: “I can see the appeal of greater propositional control for advice firms, indeed it’s an area we’re looking at closely.
“We need to keep in mind, however, that many firms will be wary of taking on the extra costs associated with governance, regulation and compliance, investment, and wider operational risk when times are so challenging and uncertain.”
Other established players, such as Embark, work with the likes of Openwork - an adviser network - providing them with versions of their platform.
Embark's chief executive Jackie Leiper told FTAdviser back in August that its white labelling arm was “as important” as growing its retail arm - pointing to the level of opportunity she sees in the space.
“While that isn’t actually the main reason that we [Lloyds] bought the business [Embark], [...] white labelling is the area I can see huge potential for growth,” she said.
“If you have a look at what's happening in the intermediary market with the consolidation activity, I think we can all see there’s going to be less firms, and bigger firms, because these bigger firms will continue to buy out advisers.
“The model Openwork has gives you a bit of a blueprint on how you provide those services elsewhere.”
ruby.hinchliffe@ft.com
