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Ned Cazalet: What next for platforms and life companies?

Platform technology providers are likely to come under regulatory scrutiny as firms’ dependence on a few big players represents a risk in the investment chain

The platform market is overly reliant on a small number of technology providers and may see life companies pulling out of the sector altogether over profitability concerns, says Cazalet Consulting chief executive Ned Cazalet.

In his latest Cazalet UK life and pensions report, Cazalet says the FCA and the Prudential Regulation Authority may be about to take a closer look at platform technology providers. 

Technology provider FNZ powers platforms such as Standard LifeZurich and Axa; Bravura acts as the technology behind Nucleus; International Financial Data Services has signed a 20-year outsourcing deal with Skandia; and GBST will soon power Alliance Trust Savings

The report argues that underlying technology providers in effect are responsible for administering tens of billions of pounds in UK retail assets and as a result could be seen as a risk centre in the investment chain.

Cazalet says: “The use of external infrastructure providers should help transmit scale benefits and reduce the strain on platform operators arising from the rebuild requirements that emanate from seemingly never-ending changes imposed by the regulator and HM Revenue & Customs.

“As platforms grow in size, however, regulators are likely to give some thought to the strategic importance of third-party infrastructure providers, which could involve more oversight and force providers to hold the same capital requirements as significantly important firms.”

Infrastructure providers & their clients


Business type



Software provider.

Ascentric, Aviva, Fidelity, Nucleus


Provides underlying fund supermarket to various intermediary and life company third parties as well as institutional services to money managers and custodians. IPS bancassurance platform is used by Nationwide.

Charles Stanley Direct, Nationwide, Willis Owen


Has provided fund supermarket functionality for life companies and other platforms.

Cavendish Online, LV, Police Mutual, Scottish Widows


Combines software provision with service capability.

AXA Elevate, Close Brothers, Friends Life, Standard Life, Zurich


Software provider.

AEGON, Novia


Wrap and fund supermarket provider behind Ascentric. Active is seeking white labelling deals from intermediary groups.

Openwork, Succession, Towergate, YourWealth


Very broad offering, including transfer agency, software provision and, as required, full service bank book BPO including call centre support.

Cofunds, Skandia, St James’s Place


Focus on supporting wealth manager platforms.

7IM, Raymond James


Focus on supporting adviser-led platforms.

RSM Tenon, Towry, True Potential

Source: Cazalet Consulting

Foward thinking

The report also highlights concerns about the future of some platforms.

It notes there is a risk that large insurers could decide to exit the market if the platform business fails to produce a return on investment, or that smaller independent providers could find themselves being squeezed out.

Cazalet says: “The life companies have big budgets and big infrastructure and are desperate to re-invent themselves. They also have a big cost base, whereas the independents are leaner.” 

He adds that insurers have spent a lot of money on platform development and may be “intending to spend whatever it takes to ensure that their business models prevail”.

He cites Standard Life and Axa as businesses that have spent heavily on platform services and warns they will need to achieve significant market share to realise an acceptable return on investment.

Cazalet notes that platform costs can be cross-subsidised where assets find their way into fund ranges offered by the investment management division of the same parent group. But he argues that the amount of investment thrown at platforms by some large insurers could see them “beating a hasty retreat before too long”.

He says: “One of the questions is whether advisers will value a company with a big balance sheet but which could be big but simultaneously weak. 

“Or will they look at a smaller platform that is profitable or moving into profitability having spent much less capital?”

The report notes that large tie-ups between platforms remain unlikely because it is difficult to merge platforms that use different underlying technology systems. It says as the re-registration process gets easier, platforms with the strongest proposition will start to poach clients from rivals.

He adds: “This begs the question as to how disfavoured, ‘slow death’ platforms manage to control their cost-income ratios, update their proposition and maintain service standards.”

Cazalet notes moves by Hargreaves Lansdown, Standard Life and Skandia to secure preferential pricing but says networks running white-labelled platforms could be in the best position to secure discounted terms.

He cites the example of Openwork, which runs its own white-labelled version of the IFDL platform.

He says: “The likes of Openwork are playing up the promise of substantial fund flows as their underlying advisers make a mass transit from transactional to service business models and shovel assets on to basis point-generating platforms as fast
as they are able.

“They are thereby making the leap in the consciousness of asset management groups from retail fund intermediary to institutional counterparty as they assemble new fund propositions to form the core of their restricted investment offerings sitting on their brand-new white-labelled platforms.”

In April 2014, the FCA will ban most payments between asset managers and platforms but it says managers can still pay for advertising.

The regulator said at the time that advertising spend should not  be used to help a provider “gain access to a shortlist of funds, influence any ranking of products, or otherwise result in a channelling of business to that product provider”.

But Cazalet says: “What is the purpose of advertising if it does not, ultimately, result in a channelling of business to the advertiser?”


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There is one comment at the moment, we would love to hear your opinion too.

  1. A very interesting take on the evolution of different parts of the industry supply chain – with which it’s very hard to disagree. We can expect the pips to start squeaking fairly soon.

    The industry’s response (or not) to the potential proliferation of share classes is also quite telling.

    Research paper on this, co-authored with Andrew Lloyd and Dan Norman, is available via our website

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