Which relationships matter most for platforms? Those with fund managers? Technology providers? Advisers? Thanks to its decision to float last week, Transact now has a fiduciary duty to care about its share price above any of those.
It is not the first advised platform to have thought about a public listing, and it certainly won’t be the last. With advised inflows dominating those in the direct-to-consumer space, the battle really is on to capture as much adviser business as possible.
Focusing on the positive, an injection of capital could give users of Transact, AJ Bell, Nucleus and others a much-needed leg up in terms of service levels, functionality and even pricing. Given the financial difficulties of some platforms, it does make sense for advisers to bear profitability and sustainability of ownership in mind when conducting their due diligence.
Yet there remains a concern that such heightened levels of investment could be anti-competitive. The FCA is in the midst of a review of whether competition is in fact working in the platform space. While there has been some consolidation, there are still a decent number of advised platforms out there to choose from, both provider-owned and independent. But if platforms really are a scale game now, a sudden flood of investment into one of them could give them the resource they need to perfectly execute a land-grab from some of the smaller players in the market.
Could fund groups with products held by those same platforms use this as an opportunity to up their stakes, exerting greater influence over discount deals as significant shareholders? Could they use the threat of shorting to their advantage?
At the end of the day though, will clients really care that Transact, which they had never heard of before anyway, is now publicly listed? You’d first have to explain to them what a platform even is. They would have to be pretty clued in to ask tough questions on exactly why their money was being held on the same platform as their adviser had an equity stake in.
The client’s gut response might be to say it sounds good from a stability point of view. Tens of millions-worth of investment can’t all be wrong. But what Transact gains in reputation and esteem from listing, it loses in falling under far greater scrutiny from investors and the public. Listed companies are no less immune to failure than small ones, as the investment industry knows all too well.
At least we’re a bit closer on knowing what on earth a platform should be valued at these days. The market has decided they’re worth quite a lot. If it gets it wrong, there could be a lot of unhappy investors, and a lot of unhappy advisers.