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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 more than 30 now.

Deloitte lead RDR partner Andrew Power says: “For a platform provider, the break even point could increase 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.”

Currently Cofunds, Skandia and FundsNetwork 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.

F&TRC director Ian McKenna says: “Platforms should be looking at their support services and use of technology so they do not need such a high level of assets to make a profit.”

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