What to expect from the great platform assets shift


Unprecedented levels of platform assets are moving from proprietary back-end systems to outsourced solutions. This is important for advisers. There is concern about potential pitfalls during technology changes and the resulting concentration of assets on outsourced providers.

A massive £136bn of platform assets are moving technology provider in the next 18 months. This represents unprecedented upheaval and raises the risk of errors. But the investment is needed to future-proof these businesses for continued change in regulation and products, as well as in customer expectation.

Currently, 57 per cent of platform assets sit on proprietary technology systems but that share will decrease to 27 per cent over the next year-and-a-half. Bravura and IFDS will see the biggest gains, largely because they are taking on Fidelity’s FundsNetwork and Old Mutual Wealth respectively.

A case can be made for either outsourcing or investing in a proprietary system, so we do not advocate one approach over another. The important thing is to communicate a roadmap to advisers.

Advisers complain about legacy and hard-to-use systems. They complain about platforms that are too reliant on paper. But in the same breath advisers will acknowledge if investment is being made. Sometimes you just need to bite the bullet. Platforms needing investment or upgrades should move forward and communicate the plan clearly.

There is no denying that upgrading technology requires significant investment, so let’s take a look at a business that has been there.

Nucleus famously went through a re-platforming exercise in 2014, moving from Bravura’s Talisman to Bravura’s Sonata. It was not a simple re-platforming: Nucleus was moving from a technology that had never been tried live, so the switch involved a change of systems to brand new software. Despite rigorous performance tests on the staging server, there were problems post-implementation, the worst of which was incorrect statements being sent to investors.

But what impact did this have on Nucleus’ business? And what might we expect will happen to other platforms preparing to make similar moves in the coming months?

We looked back at the user reviews of the Nucleus platform over the past four years to better understand. They remained consistently above average over that period but scores have declined fairly steadily since the middle of 2012.

During periods of rapid growth we often see service levels suffer and Nucleus was going through such a period in 2012. As such, the declines in user review scores are not so surprising. Reviews again declined during the re-platforming but they were not as pronounced.

We take from this that advisers are more frustrated by creaking systems than by short-term re-platforming blips. Nucleus went through the painful exercise in stronger markets and has come through the other side.

Advisers do not pay much heed to the underlying technology of platforms. In fact, in a survey we conducted last year, 41 per cent told us they do not think it is of particular relevance when conducting due diligence. What is important, however, is the technology integrates with adviser back-office systems and it is easy to use.

We encourage advisers to ask platforms for clarity on the technology roadmap, both for the back-and front-ends. We are pleased to see investment in the front-end and further plans being announced. Last week’s Platform Focus looked at Nucleus’ investment in this area and we are hearing similar noises from Old Mutual Wealth, Zurich and FundsNetwork.

Technology is expensive but the best companies make the required investments. It can hurt share price and short-term profitability but it puts the business in good stead for future growth.

We will be publishing a report on digital support for advisers focusing on front-end delivery in the coming months.

Heather Hopkins is research director at Platforum