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Chris Gilchrist: Which platforms are destined to be dinosaurs?

While a lot attention is focused on clean share prices and the cost of advice, the elephant in the room for platforms is the level of their own charges.

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I like Platforum’s annual conference. It is good to hear the platforms’ top brass talk about their plans – usually one or two use it to pre-announce plans for the following year, thus giving a useful heads-up on the new toys (sorry, valuable client-centric applications) that will soon be imitated by all their rivals.

It’s also delightful to see the boys behaving so well under the supervision of Holly Mackay, whose head prefect in high heels persona could teeter into Graham Norton territory if she pushes it much further. How charmingly but ruthlessly she chops their presentations down to ensure everyone gets to the champers on time!

That is vital because the secret gold of the conference is the opportunities it gives bosses to drop titbits of new information to consultants who harvest them to build their cred with advisers, in return for which said consultants will soft-endorse the platforms… and for everyone to memorise and repeat what sounds like (but usually isn’t) an important soundbite from the regulator. Rub my shoulder!

Amid the torrent of waffle about AUM and clean share classes – the grommets and rivets of platforms, so interesting to so few of the audience – a few presentations stood out for me. One was from Nucleus chairman Paul Bradshaw, asserting the primacy of values in a ‘trust culture’ which he says it is much easier to instil in a small than a large business.

Another was from new media guru Nic Gorey of Rocketer, who explained how Facebook data can be used to create remarkably accurate personality profiles. He uses this to target car ads by personality type – happy messages to optimists, scary ones to pessimists. There was a collective gasp when the audience realised how powerful this could be  – target no-risk structured products at pessimists, go-go funds at optimists.

The real reason I like the conference is that there is always an invisible elephant. Not one of the main presenters, and not even Holly, mentioned platform charges. Not once. They all went on about the high cost of advice and how asset management charges were ‘under pressure’, but what about the cost of the platforms themselves? Most people seem to have bought David Tiller’s argument that the biggies will cluster close to where they are and that 25bps is the lowest possible end point. So, nothing to talk about.

My own networking with more cynical large platform users tells a different story. They reckon that within three years platform charges will be down to 15bps. Most platform bosses would lose their jobs if they told their bosses or their shareholders that, so I’m sure they won’t.

Nor will it necessarily be true for the biggies. One scenario is that we’ll soon have five technology engines driving 50 platforms. Given the declining cost of entry (new builds cost a fifth of early adopters’),  in a few years’ time advisers may have the choice of several platforms with basic functionality at 15-20bps. By then, they will also probably also have several tools like Sammedia’s Moneyinfo – platform aggregators that do the front-end analysis and presentation in a CRM system, which is surely where it belongs.

Delegates at the Platforum conference found toy dinosaurs on their tables. Was that a hint about the future of platforms? After all, most of them are owned by lifeco dinosaurs.

Chris Gilchrist is director of Fiveways Financial Planning, the author of the Taxbriefs adviser guide The Process of Financial Planning and edits The IRS Report

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