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The big interview: Bravura on platforms’ ‘once in a generation’ moment

Bravura chief executive Tony Klim on his ambitions to make platform technology a commodity

Automation is coming to platforms and Bravura chief executive Tony Klim welcomes the new cyber overlords. “Platforms should be able to run their administration for less than 10 basis points,” he says.

Technology will bring efficiency, which will have an impact across the value chain. He foresees a price war and points to core elements being able to make a big difference to charges. “The ongoing core technology costs for a medium-sized platform are typically only around one basis point.”

Bravura will shortly provide the backbone technology for platforms accounting for almost a quarter of all UK adviser platform assets.

Nucleus was the first to move to Bravura’s Sonata and FundsNetwork and Ascentric are in the midst of upgrading to it. Klim says: “The biggest deals in the UK are replacing and upgrading legacy systems for life companies. Many life companies run with as many as 20 legacy systems.”

Yet UK adviser platforms are only a small part of Bravura’s business. In Australia, where the firm is publicly listed, its biggest market is superannuation. In New Zealand, Bravura powers most of the “Kiwi savings models”.

Klim, who trained as a mathematician and physicist before moving into software and financial services, would like to see platform technology become a commodity. He is frustrated that life companies are slow to recognise this, as it leads to inefficiencies. He says the transfer agencies have moved to a shared technology and if they can do it, there is no reason why there should not be greater consolidation in platform administration technology.

“It is ludicrous that customers should be asked to pay explicitly for the platform. This isn’t the way it works in other industries.”

It is a good point. Who knows how much they pay to Spotify for the music versus the platform, or to an insurer for the technology or the actuaries?

Klim thinks the current slew of replatforming decisions marks a critical moment for the sector.

“The contracts we sign with clients typically last 10 to 15 years and are normally extended. So the decision to change core technology is taken perhaps once in a generation.”

He says with the exception of big companies with deep pockets, firms cannot sustain the level of investment required to run platform technology.

But what of Transact, Parmenion, 7IM and Hargreaves Lansdown, which all run on proprietary technology and get top marks for service from Platforum surveys?

Klim acknowledges they offer good service but says the models are unsustainable. “If you look at how much FNZ, GBST and Bravura invest, how can a company like Nucleus manage to maintain that level of investment? Things are getting more sophisticated.”

Indeed, in addition to an initial AUD$100m, Bravura and its customers are investing a hefty AU$20m into Sonata each year. “It is hard to see how any individual firm can invest like that.”

Some worry that operating on a common back-end technology will lead to a lack of distinction between platforms. But Klim disagrees.

“Fidelity can look and operate differently to Ascentric, to Nucleus, to our Australian or New Zealand clients. A lot of people think we are using a fixed code base. We aren’t. That is the way it used to be done. Now, you can offer custom charging, product set-up, how it looks and, most importantly, custom process models and workflows.”

Given the recent decision at Old Mutual Wealth to change technology provider from IFDS to FNZ, some have suggested advisers need to pay more attention to the financial stability of the underlying technology providers.

Klim’s one word of caution is that inefficient technology will limit the platform’s ability to reduce the price. “If the technology is not efficient then the administration around the platform will not be efficient.”

Following the launch of Vanguard’s direct-to-consumer offering, Klim believes we will see other fund managers do the same. He also sees the lines blurring between advised and direct propositions. “Why can’t I get execution-only and advice and discretionary portfolio management in one place?”

Though Klim is welcoming of the cyber-overlords to lower admin fees, just do not mention robots. “Robo is overhyped,” he says.

What particularly annoys him about robo-advice is when people say it is a step change enabled by tech. “It’s not about technology; the technology is quite simple.”

That said, Bravura is investing research and development money on AI and Klim jokes we might very soon be asking Amazon’s Alexa for financial advice.

Another area of investment is in cyber-security, which is a further reason why he believes financial services firms should outsource their technology. A major cost-base is testing and he believes there are greater assurances with outsourced technology than with an in-house system.

So what lies further ahead for the industry? “In the future, we will combine our data in a safe environment where trusted providers can access it.” This will shake up business models, he says. Open banking standards and the pensions dashboard are just the beginning.

Heather Hopkins is head of Platforum

CV

2008-present: Group chief executive, Bravura Solutions

1999-2004: Director, Marlborough Sterling Group

1984-1994: Director, Software Partnership

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