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Integrate expectations

“If you work for a platform or wrap provider and have a heart condition, blood pressure or similar ailment, it is probably best to move to the next article.”

Ian McKenna

This column needs to start with a health warning. If you work for a platform or wrap provider and have a heart condition, blood pressure or similar ailment, it is probably best to move to the next article. Every once in a while as a columnist you need to write an article that is going to upset a lot of people but that is no reason for not identifying changes that are beginning to have a significant effect on the dynamics of our industry.

In less than a decade, wraps and platforms have had a major impact on the market. They are grabbing an ever increasing market share. Almost from their birth, there has been an uncomfortable relationship between plat-forms and advisers’ client management systems. In the early days, many platforms argued that they could make client management software obsolete.

It soon became clear that this demonstrated a lack of understanding of the many ways in which such services add value to advisers. Iron-ically, I am now seeing increasing evidence of the ability of major client management systems to reduce the role of the platform to a commodity service which the adviser can switch assets on to and away from with ease. This will be greatly accelerated should the platform community deliver on the long overdue promise of electronic platform to platform re-registration.

At the same time, I am coming across significant concerns in areas of the life and pension provider community at the power that a small number of quality CMS providers could hold.

Driven by the need to deliver a consistency of advice to meet systems and control obligations and preparing for the RDR, we are seeing an industrialisation of the advice process taking place. Most distributor businesses of any scale are in the process of embedding an advice process with their advisers that will involve reviewing client attitude to risk, asset allocation and the adoption of model portfolios.

As part of this process, it is becoming increasingly clear that one of the main ways in which advisers will deliver value in their post-RDR propositions, many of which will start rolling out during 2010, will be to reduce the charges levied by other parts of the value chain.

Some will apply pressure to the platforms, life offices and other tax wrapper providers, others to the fund management providers, either way, advisers will not just be agreeing their own remun-eration but that for the whole of the value chain.

To enable these processes, advisers are putting in place the necessary technology to achieve this in a consistent, automated way. I have never known a time when so many large distributor groups are either reviewing the tech-nology they offer or, having selected a partner, are embark-ing on a structured prog-ramme to put this technology at the heart of their businesses.

Having carried out client reviews using these systems, it is inevitable that firms will want to seamlessly act upon such instructions as they have agreed with their client. The obvious way to do this is a straight-through processing arrangement where the CMS creates and executes the necessary actions with the platform or life office.

This requires a depth of integration with the client management system far beyond that presently offered by any platform I have seen and here lies the dilemma for platforms and life offices. The optimum solution for the advisers makes the provider brand invisible.

This depth of integration is not unknown in the life and pension sector and many, myself included, would hold it out as best practice. A good example is the way the Focus point-of-sale system supplied to Barclays advisers implements with AssureWeb. The adviser can establish the necessary quotations, key features and submit an electronic proposal via AssureWeb but without ever leaving the Focus screens. All the AssureWeb work goes on behind the scenes.

What the adviser certainly does not want to do is to have to manually rekey all the transactions they have agreed with the client into the platform’s systems. This will be time-consuming, cumbersome and will lead to human errors. This is fine if only one platform has the depth of integration with a CMS, but it is increasingly becoming clear that most advisers will want access to a range of platforms to meet the needs of different clients. Using only one platform may be the default choice but it is getting ever harder to support the one platform fits all argument.

Combine this with the long awaited process for platform to platform re-registration and it becomes far more practical for advisers to review and switch platforms on a regular basis. For advisers and clients, this is almost certainly a good thing but it will certainly keep platform organisations on their toes.

Some years ago, a number of client management systems started referring to them- selves as potentially a “wrap of wraps”. It is now becoming clear quite how accurate this was. Given their enhanced ability to service legacy life and pension products and manage a far wider range of activity within adviser businesses such as TCF and Gabriel reporting, Icob and Mcob business, combined with the FSA’s proposal to outlaw the supply of systems an adviser relies on to run their business as an inducement, it is not realistic for a platform to try to replace the CMS.

Many platforms’ business models assume they will be able to cannibalise the life and pension community. Perhaps they need to look out to see if they are under similar threat?

To deliver the best services to advisers and clients, there is going to need to be what will clearly be an uneasy partnership between platforms and CMS providers. I can see a number of ways in which the platforms can protect their relationships but it will be fascinating to see the routes different organisations take.


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There is one comment at the moment, we would love to hear your opinion too.

  1. While it is impossible to see all providers coming round to this way of thinking, it is clear that the providers who do will be in a better position to benefit from full integration with the solutions adviser firms have in place.

    The prospect of more flexible models for the advice process allowing a mixture of consultancy and client self service backed by a rock solid audit trail is an exciting one.

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