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Platforms adding services to protect margins ‘could backfire’

Platforms adding services to protect margins ‘could backfire’
  One advice firm said when it integrates with the IFA ecosystem it doesn't want added services like a portal, it wants an API

Incumbent platforms which have been adding additional services over the years in an effort to protect their margins could see such a strategy “backfire” if they do not innovate their core service - the platform itself.

That’s according to NextWealth’s latest report, ‘The Great Platform Shake-Out’, which predicted the emergence of ‘Platform+’.

It said existing platforms are evolving to offer “far more services” to financial advisers.

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But while the report said this model “makes sense”, it also said these add-ons “must come alongside digital innovation”. 

“We caution third party platforms to listen closely to the needs of advisers,” the report said.

“The risk is they develop the business in a direction that does not meet the needs of their customers.”

While advisers often say they want platforms to do what they are meant to do and do it well, increasingly, platforms are trying to do many things well in order to protect their margins and continue to attract assets, according to the report.

“This strategy can work but it can also backfire,” it continued.

“Firms like Seccl and Hubwise are offering financial advisers more choice and flexibility in the platform solution and are attracting attention from advice businesses that want a digital journey or who are looking to cut costs.”

Examples of incumbent platforms which have added new services in recent years and which were cited in the report included:

  • Newly named Fidelity Adviser Solutions, which partnered with Conquest to offer planning tools and digital onboarding alongside the platform.
  • AJ Bell’s discretionary MPS, which it launched three years ago and has grown at a pace faster than most others in the industry, by percentage and net asset growth.
  • Transact’s acquisition of back-office system Time4Advice, and its MPS launch with BlackRock which FTAdviser revealed last year.
  • M&G Wealth’s unitised version of PruFund, which is still in development, as well as Novia and 7IM’s access to unitised annuities.

Anecdotally, advisers which submitted their thoughts to NextWealth’s report said some incumbent platforms have “100 sales consultants selling the platform”, which they said was a very traditional product sell and not how most IFAs make decisions.

They also said the platform sector does not really integrate into the IFA ecosystem. 

“When we integrate with the IFA ecosystem we don’t want a portal, we want an API [application programme interface] link,” one managing director of a large financial advice business said.

“We want to minimise the paper they send to us. We want to take what’s on the platform and put it in our back-office system. 

“Why are platforms building mobile apps for clients? That’s not what we want and that’s not what we want for our clients. Most large advice firms will want their own platform or they’ll want deep integrations.”

Another managing director of a similarly sized firm said most platforms are not solving the productivity challenge for advisers either.

Letters of Authority were cited as an example.

“If you do it through your own platform you can see where it is. There is no need for wet signatures, for apps, money laundering forms, etc. - it’s all done once. There is loads of stuff like that,” said one advice firm boss.

“Unless the platforms step up and make that more efficient, we’ll keep the money in house and in one model.”