Last week saw yet another twist in the tale of consolidation in the IFA technology provider market with the announcement of the agreed takeover of Exchange FS, holding company of the Exchange portal by Marlborough Stirling.
Although the Cheltenham-based software company may not be well known to many IFAs, it has a well established reputation with many life offices and mortgage lenders.
Axa Sun Life, Bank of Scotland, Clerical Medical, Egg, Nationwide, Northern Rock and Prudential are just a few Marlborough Stirling clients.
The Exchange is now part of a significantly bigger group. For many providers, the potential worst-case scenario was that Misys might find the Exchange an obvious target. Given that its ownership of networks represents some 24 per cent of the registered individuals in the market, Misys is already a huge influence on distribution.
If it could add the most widely used e-commerce portal (even if it meant disposing of some existing portal assets, to avoid a competition referral), it would have a fearsome hold on the IFA sector.
While such a deal is still not impossible, in reality it is unlikely. The recent decision by Misys to focus on developing the Assureweb portal in preference to its previous m-link service is a further indication that such a move must now be only a remote possibility. I can think of many life office sales and e-commerce directors who will be sleeping a little more soundly following last week's announcement.
But what are the business implications of the takeover? According to the Exchange managing director Jim Gaskin, it will enable them to extend true end-to-end processing in the electronic delivery of products and services from IFAs' back-office systems all the way through to the back-office systems of providers.
It is exactly this end-to-end processing that has the potential to deliver essential savings for IFAs and providers in the 1 per cent world.
I was impressed by Marlborough Stirling chief executive Graham Coxell's grasp of the key issues for IFAs and providers. He believes the enlarged group is ideally placed to increase the depth of its relationships with life offices, mortgage lenders and IFAs.
He says that within the next 12 months it will deliver an integrated point-of-sale system that will have all the features necessary to support the electronic submission of life and pensions products and mortgages – something that has been conspicuously absent for many years.
Coxell also believes that this could be extended into general insurance and fund management products: “IFAs want to transact on a single portal for all the products they offer, rather than a different one in each product area. We want to become the independent platform of choice for advisers and providers”.
There is little doubt that the Exchange has changed significantly over the last few months. Having disposed of its business-to-consumer services, it has won a series of contracts from product providers and IFAs, including deals with Royal London, Standard Life and Chase de Vere.
It has also delivered something many smaller IFAs have been requesting for years – the ability to access the service over the internet via a standard browser. This should remove many of the difficulties IFAs have had operating the system over local area networks.
By bringing together both provider and adviser solutions, the new company will be well placed to meet the challenges of multi-ties.
We are now seeing two significant and very different major offerings emerging in the portal market. Misys clearly has an opportunity to offer services specifically focused on the needs of the members of its various network subsidiaries.
In contrast, Marlborough Stirling is explicitly stating that it will not acquire distribution but is seeking to provide a totally independent platform that advisers can use to automate delivery of all their products over a single platform.
While these two players will probably dominate, it is important we see other players offering additional choice.
Synaptic continues to offer an alternative to each with a solution that currently links to more of the IFA back-office system providers than either of the solutions from its larger competitors. Equally, CMG has a highly integrated point of sale and back-office solution for the largest IFA firms.
It is almost certain that at some stage more potential portals will emerge. It is a strange month if I do not get a call from an organisation planning a new portal. The reality is, however, that it is a difficult market for new players to enter.
Misys clearly has this via its networks, the Exchange through its client base, Synaptic through the users of its research software and CMG has mission-critical solutions in place with some of the largest IFA firms. Bankhall clearly has access to a significant potential user base via its members and those of its sister Portfolio Members Services affinity group.
However, although I heard positive noises from this direction a few months ago, things seem remarkably quiet of late.
A healthy portal market for IFAs and providers will have sufficient well funded technology players to provide choice, while at the same time not having so many participants that resources become overly stretched.
This situation seems to be coming together now and against this background it is difficult to see the Marlborough Stirling acquisition of Exchange FS as anything but a good move for the market.
Ian McKenna is a consultant and director of the Financial Technology Research Centre, which works for a wide range of industry organisations, life offices and technology companies, including Microsoft, Assuresoft and The Exchange. He can be contacted by email at email@example.com Tel: 020 7935 2599