The platform community is fast realising the introduction of pension dashboards by 2019 will have a significant effect on them, both in terms of the services they provide and what they can charge for it.
When considering these issues, it is essential to recognise a number of points. First, pension dashboards are only accelerating changes that would have happened anyway. Government support for the project is simply ensuring consumer benefits arrive sooner rather than later.
And as well as the benefits for consumers, the impact on advisers is also hugely positive. Dashboards will provide access to unparalleled levels of information about medium and long-term savings products far more easily and accurately than before.
They will also significantly drive down costs, not only for platforms and investment products generally but also in terms of the adviser’s administration burden. Reducing costs of investment services is not the Government’s primary motivation behind the project but it is a welcome bi-product.
As the Government will compel all pension providers to provide data, as well as deliver an individual’s state benefits itself, the dashboards will produce a comprehensive picture of a consumer’s retirement provision all in one place.
Based on my conversations with the Treasury, I am convinced such compulsion will extend to all medium and long-term savings products in time. Similar obligations are being placed on banks through the open banking API initiative, so why would it not impose the same transparency on all other savings providers?
Where platforms can piggy-back
There is no doubt many platforms will offer dashboards. However, adviser software suppliers are already far better positioned to deliver such services.
The dashboards will need to provide consumers with a view of not just their assets that sit on a chosen platform but also the legacy products they own. While I recognise platforms deliver a lot more than just a single view of investments, what if a key benefit is suddenly available for free elsewhere? It must create a downwards pressure on charges.
From their earliest days, some platforms argued an adviser using their service did not need separate client management software. This completely ignored the fact clients would have more than just their assets on the platform, never mind the fact the client management software would also provide crucial accounting and regulatory reporting functions I have yet to see any platform not built by an advice business deliver.
To this day, it is only adviser-operated platforms like True Potential and Benchmark’s Fusion that offer advisers the ability to present or appliance non-platform assets in a single environment.
Pension dashboards will make this easier for platforms. But how many will take up the opportunity, especially as adding such services will be a defensive mechanism for which they will not be able to charge?
The RDR has made it even clearer that the real value in the advice process is in financial planning. This has never been an area that platforms were strong in, although I was interested to read Standard Life’s comments recently that it intends to enhance this area.
“While I recognise platforms deliver a lot more than just a single view of investments, what if a key benefit is suddenly available for free elsewhere?”
It is in a far stronger position than most of its peers by virtue of its ownership of Focus Solutions, which has been doing some excellent work enhancing its adviser software over the last year or so. Other platforms do not have the luxury of such resources within their stable, so they will need to seriously consider how to address this gap.
The last few years have seen major advances in the adviser software market. While Intelliflo and Iress are still the largest players, several others have significantly upped their game. There are now a dozen or so key software suppliers with whom platforms should consider strategic partners.
With more of the value being delivered by the services these software providers supply – and at a fixed cost – platforms need to work on evolving their relationships with them. Pension dashboards will only increase how central they are to the ways adviser firms operate.
Ian McKenna is director of the Finance & Technology Research Centre