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Check exits for platforms

Skandia is warning advisers to consider platform providers’ exit strategies as part of their due diligence process ahead of likely consolidation in the market.

It says platforms will be forced to reassess their original structure, leading to mergers, acquisitions, stockmarket listings and possibly even closure.

Platform marketing manager Jeremy Mugridge says: “Advisers need to consider what impact these scenarios would have on clients’ investments. If they have selected a platform because it is independent, how will they feel if it becomes part of a traditional life company?

“Companies may proclaim to be 100 per cent adviser-focused but they all have vested interests and future ownership structures are far from certain. This has to be a consideration for any adviser.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Impact of exit strategy? Like selling to a big South African insurer and then embarking on a massive cost-cutting exercise to the detriment of proposition development and service?

  2. The poorly-disguised swipe at Nucleus is hilarious!

    I would probably extend that warning to UK-based subsidaries of overseas parent companies looking to make a profit in a mature, competitive, highly regulated market. What happens if Old Mutual realise there’s money to be made in the developing wolrd?

    I’ve always been a believer in if you are talented you should focus on the benefits of your own servieces as opposed to questioning your competitors. Of course easier said than done if you have neither of the former!

  3. This is very sensible advice given the fragility of the whole platform/wrap arena.

    So, to kick things off – Skandia, what’s your exit plan? Please publish it.

  4. Mister maker has it right, this is a swipe at Nucleus and David F!

    However, it is a serious issue. With wraps like Nucleus who have relatively small amounts of AUM are they really sustainable in the long run? (By small I mean that Nucleus, with circa £2 billion AUM is really small when you consider that some individual funds have £5-10 billion in them)

    Does Nucleus’s reliance on the AUM that Paul Hogarth’s organisation bring in make their model fragile if Hogarth exits stage left pre 2013.

    Are the smaller currently independent wraps really just waiting for the big cheque from whichever life co does not yet have a wrap???

    If a wrap goes pear shaped or whatever, it will be a nightmare for the IFAs and client with monies held. There will be no issues re the ownership of assets, as they are all held in trust but unravelling such an organisation could be troublesome to say the least. Think Lifetime 🙁

    I’m sure David will be along soon to put me right!

  5. Hi Dathan

    I’ll resist the urge to comment on Skandia’s press release (for now) and aim to restrict my remarks to the Nucleus business plan. Naturally having gone live in Dec 2006 Nucleus has markedly less assets under management than the longer-established fund supermarkets. It’s probably more relevant to look at growth than AUM as many of the larger providers have failed to demonstrate any meaningful correlation between scale and profitability. I haven’t seen Skandia’s net inflow numbers reported anywhere but given the relative size and cost base of the two organisations I would imagine we are doing just fine in relative terms with monthly growth over the last 2 years sitting at around 7%.

    My take on sustainability would be that those companies able to embrace the RDR, deliver full transparency and generate profits while offering a competitive pricing structure are most likely to be the long-term winners. I think Nucleus is very strong on the first two and on the pricing point. In addition we have posted a profitable period this year and while continued to flirt in and out of the red at present we should become sustainably profitable within just a few months.

    With respect to your comments about Paul Hogarth I’ll leave him to comment should he wish but suffice to say while we great value that relationship we would always seek to ensure we were not overly exposed to one ‘sales channel’.

    We operate in interesting times and it will be fascinating to look back in 2020 and study who won, who lost and why. From a personal perspective I’ll be astonished if all the winners emerge from the current ‘scale’ participants.

    Cheers and enjoy the rest of your weekend.

    David

    PS – I think there was a time when BA was the world’s favourite (and as I recall most valuable) airline

  6. Be concerned, look at the occupational pension world platforms. JLT buys the biggest pension platform and the panic that followed that. Would you buy a platform from your biggest competitor, or worse they take over your platform. Let say someone gets the capital and starts buying platforms with a view to holding you to ransom. Have you got £5 million and three years plus to build your own. Providers websites are free at the moment but it won’t be long before they will charge you for it.

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