Announcements at the Intelliflo conference last week will have far wider ramifications for the advice market than may be immediately obvious. It was the newly launched Integrated Model Portfolio Service that will see investment manager parent Invesco charge advisers £1 per client that really caught the headlines.
The service makes operating procedures many advisers have been requesting for years a reality, by removing manual data entry and the need to log in to platforms’ individual systems for the rebalancing process.
This makes it essential for other adviser software suppliers to replicate similar functionality.
Many of the key decisions about which products and investments to choose are no longer made within the practice management system, so a strategy built just around communicating with the back office of a firm is flawed.
Platforms, asset managers and life companies need to understand which technologies influence which decisions. There is time for groups to build similar services but they need to move quickly. Indeed, this is not an area where anyone can afford to be left behind.
Intelliflo’s announcements will undoubtedly change the way advice firms work and are already being very positively received.
Last week, Surrey advice firm Clairville York founder Les Sharpe told me: “I don’t want to use each individual platform’s technology because I’m not used to it and I don’t want to see each individual provider’s expensive logos.
“My clients have already decided to deal with my firm. A straight-through process will save so much time and improve accuracy.”
Sharpe had already spoken to three platforms to make it clear supporting these features would be a huge factor in his future due diligence. He added: “This instantly replaces discretionary fund managers for me. I’ve just got to decide which model portfolios I want to use.”
Money Honey Financial Planning managing director Jane Hodges says: “Anything that makes the process for a client more streamlined and requires less work for the adviser, so they can pass on the saving to the client, has got to be a good thing. This will also put the cat among the pigeons in terms of other organisations being completely paperless. It will undoubtedly influence our platform selection and business placement in the future, with supporting these capabilities significantly determining who we place investments with.”
Some platforms may take the view that Intelliflo’s 35 per cent market share makes it impossible for them to resist embracing the iMPS initiative, and will not be willing to support the same services for other software suppliers. This would be a grave mistake. Just like any other market, the advice community needs healthy competition. If Intelliflo is allowed to be the only software supplier to offer such a streamlined process, it will only grow its market share even further and it would not be good for it to become overwhelmingly dominant.
Consolidation in the adviser software market, especially in the area of practice management, is essential. According to the FCA, there are 32,000 investment advisers in the UK. Assuming an average of 1.5 support staff for each adviser, that makes the market around 80,000 licences. Given there are in the region of 20 practice management system suppliers, and one has a 35 per cent market share, I simply do not see how all of them can survive.
Platforms need to think about how they can deliver similar deep integrations to those Intelliflo now is. And these issues are not limited to just platforms; they should also be considered in the context of life insurance, annuities and any other product that might be distributed via an adviser.
The Origo Integration Hub will make this easier for smaller technology suppliers, but it should not be seen as the answer to everyone but Intelliflo. And just having integrations with practice management systems won’t cut it either. As mentioned, most of the key decisions on client recommendations are now made in a range of different systems, so it will be crucial to give advisers the right data in the right systems at the right time, and in the way they need it.
Intelliflo’s announcements will trigger major changes in the future direction of technology adoption for the whole market. From the smallest advice firm to the largest platform, the right plan for their future will be very different today from last month.
Ian McKenna is director of Finance and Technology Research Centre
You can follow him on Twitter @ianmckennaftrc