What is the business impact of changes to platforms?

However, the effectiveness (or not) of the underlying technology stack will be the primary contributor towards the outcomes the firm is generating for itself and, more importantly, its customers.

From a provider’s perspective, the decision as to how to manage this underlying technology, and in particular whether to run things in-house or to outsource to a third party, is one of the most important strategic decisions that will be made.

Get it right and advisers, clients and shareholders will be delighted. Get it wrong, and you will have to deal with the consequences of the opposite.

Outsourcing is not an inevitable destination for all providers.

For advisers, the decision as to what platform(s) to use within their business is equally profound. This will, of course, require a broader research and due diligence process than just focusing on the underlying technology, however said technology can not be ignored.

No adviser I know wants to spend time moving clients from one platform to another, especially if it is as a result of a poor choice being made in the past.

And with the platform technology market rapidly evolving with the emergence of credible white label and/or 'adviser as a platform' propositions, the strategic nature of selecting the right partner that providers face is starting to be felt within the advice profession.

When we look at how these decisions have played out at provider level, we can see that 30 per cent of advised platform assets are held on in-house proprietary technology, with 70 per cent outsourced to third parties.

Over a third of these are held with FNZ, who serve the likes of Quilter, Abrdn and Aviva (amongst others). GBST assets account for 19%, held via Aegon, AJ Bell and Aviva. Bravura’s £79bn are held through the Nucleus, Fidelity and M&G Wealth Platforms.

This 70/30 split between outsourcing and in-house tech has been relatively stable for a while now.

Quilter was the most recent provider to make the leap from one side to another, with its protracted migration to FNZ. History tells us that these migrations can be hugely challenging to manage and deliver safely, which often translates to delays and projects going over budget.

There is a real opportunity for platform technology to help firms meet the requirements of consumer understanding and support consumer duty outcomes.

With the Financial Conduct Authority's consumer duty and the need to avoid foreseeable harms looming large, any provider thinking of making this change will need to ensure the project is very effectively managed.

However, that is not to say that outsourcing is an inevitable destination for all providers.

Within the 30 per cent who are running things in-house we find hugely successful and popular platforms such as Transact, 7IM, Parmenion and True Potential. 

All of these providers will attribute a large part of their success to being able to directly control their own technology and upgrade it as and when they choose.

Conversely, those who outsource will point to technology being a specialist function, with the core platform functionality almost commoditised. By outsourcing they can focus their attention on the wider proposition and adviser support functions.

Both models can and do work. It is up to advisers to decide what works best for them and their clients.

Like most things, consumer duty adds a further layer of complexity to this topic. The requirement for all firms to avoid foreseeable harms cuts to the heart of this decision-making process, both for the long term and any implementation period.

It is hard to see how the old days of saying 'technology upgrades are always difficult', in tandem with the resultant system down time, will stand up versus the consumer duty cross-cutting rules.

Looking at things more positively, there is a real opportunity for platform technology to help firms meet the requirements of consumer understanding and support consumer duty outcomes.

More options

As already mentioned, the evolving nature of platform technology means that advisers now have more choices available to them, with the emergence of a number of new providers and technology solutions.

Platforms such as Fundment, Platform One and Seccl open the door to a new world whereby advisers can white label the underlying technology, or even take on their own permissions becoming a Platform Service Operator.

This can enable the strategic upside of controlling your own proposition and technology – that the aforementioned in-house technology providers enjoy – to be shifted to the advice firm. If that sounds like a lot of work (and it is), then the evolving adviser back-office technology landscape might prove attractive.

New entrants such as CRM Planner are adopting a fully open approach to integrations, and more established players are too. Intelliflo’s recent announcement of their integration with SS&C/Hubwise has the potential to redefine the role of a platform within an advice business.

The market is dominated by small firms, many of whom will not have the necessary resources to adopt this level of business change.

When advice firms are reviewing their platform selections it is increasingly not just about what the best solutions are in the immediate term, but whether they want to position themselves for a more fundamental change, using technology (whether that is platform and/or back-office system tech) to unlock business efficiencies and improved customer outcomes.

This win/win of an enhanced customer proposition and improvements to the bottom line is what everyone craves. If the business case shows these benefits could realistically be achieved, with minimal risk in doing so, it starts to become a no-brainer.

However, life and business are rarely that simple. With 90 per cent of advice firms having less than five advisers, the market is dominated by small firms, many of whom will not have the necessary resources or indeed desire to adopt this level of business change.

Where available for investment, capital might often be better deployed with a greater ROI elsewhere, for example hiring an additional paraplanner or adviser.

And as we have already highlighted, the consumer duty requirements for all firms to avoid foreseeable harms will require any business change activities to be very carefully planned, managed and delivered.

However, as the market becomes more mature, with the existing incumbents becoming more and more experienced from previous implementations, combined with the energy and disruption introduced by the new entrants, any provider or adviser looking at their technology options is likely to find an increasingly competitive and attractive range of options available.

Mike Barrett is consulting director at the Lang Cat