Platforms will need £200bn of assets under management to survive and will eventually charge just 10 basis points for their services, according to Towry group chief executive Andrew Fisher.
Fisher made his predictions for the UK platform market at The Platforum conference in London last week.
He told delegates: “There is an issue in the platform market of too many players with not enough scale. Just £2bn of assets under management is not enough and £20bn is not enough. £200bn is probably about enough, so there is a little way to go.
“I would expect providers to be charging 10 basis points in five years’ time for a platform. It is basically an administration system and that seems to be the right number. Scale players will have £100bn plus and non-scale players will not be left in the industry.”
Fisher also forecast a serious contraction among platform providers. He said SEI, State Street, BNP Paribas, and BNY Mellon will be the only corporations that survive. He claims that this is due to their scale as each currently holds over £600bn of assets.
Several providers have dismissed Fisher’s comments as extreme but some providers argue that a platform’s scale will become increasingly more important.
Cofunds sales and marketing director Alastair Conway says: “My sense is that Fisher is being extreme in his statements. But I do think the lar-ger platforms have got a much better chance of surviving and have got more ability to manage their margin going forward.
“I do not know whether there will be four left standing or a couple more but I agree the market has a lot of consolidation to go through.”
Skandia platform marketing manager Jeremy Mugridge says: “The entire UK platform market currently has just over £100bn of funds under management so a single platform having £200bn is probably quite a way off.
“But there is no doubt that the sentiment is right – scale matters. Scale enables a platform to operate sustainably at lower margin while at the same time continuously evolving its service to offer value to customers and advisers.”
But Mugridge adds that 10 basis points is unlikely to be a sustainable price to operate a platform that adds value to an adviser’s business.
Transact head of marketing Malcolm Murray agrees that a charge of 10 basis points cannot provide the comprehensive platform services currently available to clients and advisers.
He says: “What Andrew Fisher wants for 10 basis points is not what the wrap services in the UK are offering. He is talking about a transaction-based dealing service, which is not what would help the UK adviser market.”
Murray argues that alth-ough there is room in the platform market for consolidation, there are new entrants looking to break into the market too.
He says: “There has been some consolidation and there will be more to come, but there is a lot of scope yet for this market and it certainly has not reached anything like its saturation point.”