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Deloitte: Platforms will need £40bn to break even

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Platforms will typically need £40bn in assets to break even, according to Deloitte.

Increased competition and falling margins will mean the average revenue of platforms will fall from the current level of 30bps to 20bps, which Deloitte says will push the break even point from £20bn to £40bn.

As a result it says there will be less than 10 providers by 2018 compared to the current number which stands in excess of 30.

Deloitte lead RDR partner Andrew Power says: “The value of assets held on platforms is estimated to grow from about £200bn today to £600bn by 2018. One consequence of the RDR is that margins will be squeezed with revenues for platforms likely to fall from about 30bps to 20bps. 

“For a platform provider, this could increase the break even point from around £20bn of assets to about £40bn. The result will be that the intermediary platform market will consolidate to fewer than 10 large providers and a few specialists compared to about 30 platforms today.”

Currently Cofunds, Skandia and FundsNetwork all have in excess of £40bn assets.

A number of other platforms have reached profitability with considerably lower levels of assets including Transact, Novia, Nucleus and Ascentric.

A recent study by consultancy and software provider Altus showed platforms’ total revenue in comparison to AUA fell from 80bps to 40bps between 2006 and 2011.

The research, carried out across the biggest 20 UK platforms, showed total revenues of £740m for 2011 compared to revenues of £330m for 2006 with total expenditure increasing to £790m from £380m at the end of 2006.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. What a pointless article. The sentence which states numerous other platforms have achieved profitability which significantly less FUM just shows this is stupid. Also if revenue drops by a third to 20bps why would FUM need to double to £40 billion? Load of rubbish.

  2. Chris Stilwell 1st July 2013 at 12:04 pm

    How come Transact have been making profit every year for a number of years and still deliver far and away the best service of any industry provider? yet they are still no where near the “Apparent” current £20 million level!

    This doesnt do much for the credibility of Deloitte or anything they might say in the future!

  3. What would really dent their credibility would be the confusion of millions with billions…….

  4. What a load of rubbish from Deloittes.
    What are re they basing their figures on and what assumptions have they made?
    Are they a load of Ex Bankers?
    To all Deloittes customers-check their figures and assumptions from now on!

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