Ian McKenna: What must platforms do to survive?


So platforms are dead. Or are they? After 15 years of an almost unanimous view that platforms are the future, their obituaries have appeared overnight. The death of platforms is perhaps an exaggeration but they are in need of serious surgery. Most are in the intensive care unit and, indeed, some will not survive. It is time to explore what they need to do to have a valid role in the future.

Selecting the platforms that are best for their business and their clients is going to be one of the most important factors in determining an adviser’s growth and profitability. This makes the FCA’s recently restarted review of their due diligence even more timely.

Ultimately, platforms provide a technology function and this will be even more the case in the future. The best platform going forward may be one you do not even realise is there. Standalone platforms, where an adviser has to manually enter data and transactions with all the duplication of effort and risk of error that brings, will not be viable commercial partners going forward.

Adviser firms want to reduce the costs incurred in providing and executing advice and so platforms that can seamlessly move data between the key systems they use and execute the related transactions will become increasingly attractive.

There has been a significant shift in the epicentre of the adviser technology market. The practice management software through which an adviser manages their firm is no longer the most important system in the business. In a digital world, the system that matters most is the client portal. This technology is increasingly the public face of the adviser firm, available 24/7 when the adviser cannot be, not replacing them but complementing the relationship, making it a day-to-day part of clients’ lives.

Platforms have fallen to third, even fourth, place in the hierarchy. They were always subordinated to practice management systems in any business that wished to optimise efficiency – and consequently the cost of advice – through the effective use of technology. They have grown through making it easier to manage multiple assets via a single infrastructure. Now they need to make this far easier to achieve in order to continue to deliver real value and enable the adviser to do far less to achieve more.

Every action within the software the adviser is using to interact with clients (which is increasingly the client portal, not just the practice management system) must be automatically transferred to the platform with any necessary transactions sanctioned from within the advisers’ chosen system. Anything less than this will create unacceptable additional costs.

To reduce regulatory risk, having a consistent solution for risk profiling and portfolio construction is also important. It is only fair to recognise a significant number of smaller firms are not investing in sourcing independent tools, relying instead on platforms to deliver such capability. But this brings risks.

Unless they are going down the single platform route, or all selected platforms use the same tools, this means clients will have risk attitudes, capacity and even investment strategy assessed in different ways. Firms that go down this route may still see the traditional platform approach as appealing, although they will increasingly find this a false economy.

In practice, seamless integration can be a very expensive activity. It requires deep pockets and is  likely to tip the platform playing field in favour of those who have the ability to not just build but also maintain extensive interaction. Advisers should not be misled into thinking this is easy to do. There is a huge variation between what different platforms actually deliver in this area.

However, for those looking to decide which adviser software to use, understanding which providers your preferred platforms have detailed integrations with will be a significant factor to consider.

The closer the integration between the different systems in an adviser business the greater the scope for reducing cost, improving efficiency and enhancing service. Three compelling reasons for making such factors a key part of any platform or software selection process.

Ian McKenna is director of Finance & Technology Research Centre