The latest research from Investment Trends identifies some fascinating contradictions among adviser attitudes to the platform market. Some of these will doubtless provide considerable comfort to the platform community, while sending a chilling message to traditional investment providers that have not staked out their claim in this community.
At the same time, there are indications that this is no time for anyone in the platform community to be complacent. Indeed, the report contains ample evidence that the smaller independent platforms are far more popular overall than those operated by life and pension providers.
Among the many contradictions the report throws up is a clear trend suggesting that, while many advisers still see platforms as a panacea in terms of what they deliver both to the consumer and to the adviser firm, an increasing number do not.
Across virtually all areas examined, advisers are seeing fewer benefits for their clients when they use platforms than when they use other investment vehicles.
While the difference in attitudes between 2010 and 2011 was relatively minor, with small swings either way on different issues. This year, by comparison, the attraction of platforms seems to have lessened considerably across all areas, with the notable exception of their lower charges for financial advice.
The change is even more noticeable when it comes to how much platform adoption benefits the adviser firm. Last year’s research showed that adviser perception of platform benefits improved in virtually all areas: this year’s indicates that this trend has gone in to sharp reverse.
In stark contrast, advisers now see fewer barriers to platform adoption, although there has been a modest increase in the proportion of advisers who see no benefit at all to clients, from just under 25 per cent last year to about 28 per cent.
This seems to suggest a hardening of attitudes among a significant minority of advisers who simply do not buy in to the platform message. New questions this year also revealed that nearly 14 per cent of advisers do not see platforms as suitable for their clients.
On the question of which firms have the main platform relationship, it is the long-standing players – the Skandia, Cofunds, Funds Network, Transact and Standard Life brands – that have the lion’s share of the market.
By comparison, advisers themselves reveal a very different picture of which platforms are the most popular across a wide range of areas. When they are asked to state their favourite platforms, Transact is the only long-established player that appears regularly over the wide range of criteria explored. Among top choices for adviser satisfaction, Transact is joined by predominantly the smaller independent firms, with Nucleus, Novia and the quasi-independent Ascentric all featuring regularly.
True Potential has also joined the most popular group in many areas, although it is not as yet broadly identified as a favourite. Unsurprisingly, the Newcastle-based software supplier-cum-platform is identified as the most popular solution for transferring data, a problem that is recognised elsewhere in the report as the biggest single technology barrier advisers face in using platforms. It is not surprising to see so many advisers preferring a solution with tight data integration, and to see this recognised as such is a major challenge for other platforms. This probably bodes well for Zurich, which has certainly made more progress in this area than other platforms.
This supports my expectation that we will see more adviser-client management systems partner with wholesale platform technology suppliers over the next year to 18 months.
As a matter of commercial logic, this will give them a much better opportunity to monetise their businesses and could deliver genuine synergies for software and platform provider alike, while at the same time optimising the administrative benefits for advisers. This, in turn, would also facilitate common aggregation of both platform and non-platform assets to deliver the sort of consumer-facing proposition that will be needed in a world where digital communications and, especially, mobile devices are increasingly the consumer platform of choice.
I was surprised to see no reference at all in the report to Best Practice, which is probably the closest to True Potential in offering an integrated platform within a highly functional client management system.
Unfortunately, when the report looks at the other technology used by advisers little insight can really be achieved as Avelo ExWeb and Microsoft Excel are identified as the main planning/advice software used by firms.
This is probably more the result of a lack of understanding by those designing the survey of the role that different adviser software packages play than a true reflection of current adviser practices. Indeed, the most used client management system identified is Trigold Crystal, which is, of course, a system for mortgage brokers.
While a significant minority – 20 per cent – of advisers have ceased using one particular platform in the past year, 80 per cent either cannot or do not want to change.
Of those advisers that do want to change platform, the most popular reason is a desire to achieve lower pricing. With a fully-fledged price war clearly in progress, those wanting to change are likely to have plenty of options. If the latest indications are true, we are going to see platform pricing collapse over the next 12 months.
Overall, it is clear that platforms will continue to have a dominant role in the investment market. And there are obvious opportunities for those that understand how to deliver the next generation of platforms, in terms of both price and functionality.
This suggests that those organisations that have effectively grown by cannibalising life offices and directly-held investments are themselves highly vulnerable to the emergence of predators.
Ian McKenna is director of the Finance & Technology Research Centre