The level of scrutiny around the conflicts of interest in vertically integrated firms will make that business model hard to sustain in the future, according to Aegon.
Speaking at Money Marketing Interactive in Harrogate today, Aegon chief distribution and marketing officer Mark Till predicts challenges to vertical integrated models will be a significant change for the industry.
He says: “It is an attractive model if you are a shareholder because you use your influence in distribution to guide investments towards your platform and your investment solutions and therefore allow you to participate in profit generation from all parts of the value chain.
“That is increasingly an area where the level of scrutiny around conflicts of interest will make that model increasingly difficult to sustain.”
Till makes it clear that Aegon is a platform business and is not going to get involved into distribution: “It is very odd to say to advisers, we want to be your platform of choice and then on the other hand covet your customers and try and bring them into our business.”
Till also outlines three challenges facing the platform market in its next phase of development; the first being generating better returns for shareholders.
He says: “If you were to take the 28 platforms [in the market] and the £520bn of assets and they were one business, it would just about break even, probably turn a small loss.
“That is an unsustainable business model to not be able to make a profit when providing services to 10 to 15 million customers. That does not give safety and security to the users of that platform for the regulators.”
He adds: “There is going to need to be a phase where shareholders see certainty of return such that we all get the benefit of commitment to this sector going forward.”
The second challenge Till highlights is creating a better user experience for advisers and the third is lowering costs.
Till says at the heart of those challenges is consolidation.
In May, speaking at Money Marketing Interactive in London, Till predicted there will be just four large-scale platforms in the next three years alongside a smaller number of niche or boutique platforms.