In this final platform focus before the Christmas break, we take a look FundsNetwork. The platform has had a busy year: completing the conversion to clean shares, pushing ahead with re-platforming to Bravura’s Sonata solution and introducing a wider range of third-party investment products.
It is the second largest platform by asset size, with assets under administration standing at £57.4bn as at 30 September. However, such significant assets mean it is fairly exposed to volatile equity markets and, as a result, AUA declined by 4.5 per cent in Q3.
FundsNetwork’s performance in 2014 was formidable, with net sales breaking the £1bn mark each quarter. While net sales this year have been healthy and steady they have not yet reached the heights of 2014. The platform has seen strong inflows into its pension wrapper, however.
It tells us it is committed to open architecture and now offers third-party exchange traded products and investment trusts. This should pave the way for greater flows into on-platform discretionary fund manager models. It will look to expand the range of models available in 2016 and has been improving the functionality for DFMs to attract more onto it.
A key differentiator for FundsNetwork is that its size and scale gives it the leverage to secure deals on funds. It tells us it has negotiated 309 discounts from 22 fund “partners” for the UK platform. As such, its pricing stacks up very well against the competition for portfolios of £100,000 upwards for both buy and hold investors and model portfolios.
When it comes to its technology strategy, there are two main strands. First, it will complete its re-platforming to Bravura’s Sonata by end of 2016/early 2017. Re-platforming can be a painful process and there will inevitably still be hurdles to overcome before Sonata goes live. However, if FundsNetwork’s handling of its programme to convert to clean share classes is anything to go by, it is in a very good position for a smooth roll out.
The second strand is the incremental improvement to its user interface. These continuous adjustments come as a result of user feedback, which is encouraging. In September, FundsNetwork launched a new client management service, which has some nifty features. We particularly like the alert that flags if there is a feature or charge on the fund that advisers should be aware of.
The goal is to make the platform simple and easy to use. This is critical, as feedback from advisers on usability up to this point has been mixed. With these improvements being made we expect to see improved usability scores in 2016.
The next area of improvement for FundsNetwork, in our opinion, should be business development manager support. The larger platforms have to service a much greater number of advisers and, while those that place significant business get a better level of support, some of its peers get better feedback.
One of FundsNetwork’s main New Year’s resolutions is to focus on service. Indeed, as its head of advisory services Jon Everill tells us, this will be the main battleground for platforms in 2016. We also expect to see further investment in digital and in improving value for the end-investor.
FundsNetwork has the commitment and support of its parent company, family-owned Fidelity International, which is one of the largest global retail fund managers. It is clear its tacticians have the backing and the resources to win the service war.
Miranda Seath is senior researcher at Platforum