Platform focus: Could growing pains put pressure on James Hay’s proposition?

Seath-Miranda

Our first profile of 2016 focuses on James Hay’s Modular iPlan. The platform had a strong 2015, which appears set to continue. James Hay is betting on attracting assets into its on-platform discretionary fund management proposition. It will also look to grow its share of the on-platform Sipp market.

Asset growth in 2015 was robust. In fact, the platform’s positive growth bucked the trend for the sector. Assets under administration were up by 16 per cent year-on-year, beating overall sector growth of 14 per cent. It is currently the sixth-largest platform by AUA with £18.5bn of assets, putting it just ahead of AJ Bell Investcentre.

Given James Hay’s long pedigree as a Sipp provider, it is unsurprising 97 per cent of Modular iPlan’s assets sit in its pension wrapper. The platform has successfully hoovered up Sipp plans when the opportunity has arisen, acquiring Capita’s book in 2014 and 4,000 plans from Towry in Q3 last year. The Towry acquisition boosted net sales to £1.56bn in that period.

James Hay’s parent company IFG Group, headed by former managing director of insurance and investments at Barclays Paul McNamara, also owns advisory firm Saunderson House, another driver of asset flows to the platform.

Advisers pay a basic fee of £195 and then pay for additional functionality as they use it. This is a unique charging structure that sets Modular iPlan apart from its peers. The pay-for-what-you-use approach resonates with users and is arguably a fairer system. However, we do have some reservations this complex charging structure is fairly impenetrable for the end investor.

The platform saw notable improvements in its scores for BDM support, quality of customer service and ease of doing business in 2015. It also stands out for making significant gains in its technical support scores and tells us it is investing in staff training to continue to improve in this area.

However, James Hay is absorbing a large number of new Sipp plans onto its platform, which could lead to growing pains, putting a strain on support services. If the platform’s Sipp land grab continues in 2016 we will look to see how this affects advisers’ perception of the user experience.

A new on-platform DFM service, the Managed Portfolio Panel, was launched in August. It consists of eight DFMs: Brewin Dolphin, IPS Capital, Marketstar, Morningstar Investment Management, Seven Investment Management, Smith & Williamson, Tilney and Vestra Wealth.

The platform’s decision to opt for a panel could be a shrewd move as it enables it to deal with a manageable range of DFMs and presents advisers with a clear choice. However, it is at odds with a whole of market philosophy.

The platform offers trading via Equiniti and a range of investment trusts and ETFs. One adviser commented last quarter that the stockbroking service lacked efficiency but we should point out advisers can access alternative stockbrokers through the platform.

James Hay does not have any plans to ditch its bespoke, proprietary technology, arguing it gives the platform greater control and flexibility, particularly over upgrades. The platform supports a paperless approach, providing e-signatures and secure messaging.

Whatever advisers’ preferences may be for paper versus paperless, this is the direction of travel the industry must take. However, it means security is of paramount importance, particularly as the platform uses proprietary technology. It tells us it is investing in this area.

We are optimistic Modular iPlan will continue to see healthy growth in 2016. With concerns over the capital adequacy of some of the smaller Sipp providers, it looks well placed to pick up Sipp plans from those who may be looking (or are forced) to exit this market. Its key test will be how well it can manage the pressure that growth will inevitably place on service levels and adviser support.

Miranda Seath is senior researcher at Platforum