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Profit remains elusive for provider-owned platforms

Risk-reward-attitude-profitPlatforms that started life as part of a larger investment or pension provider still struggle to make a profit when compared to start-ups, research from Altus Consulting shows.

In a new white paper, Altus says the key to the “pure” platforms’ success – those that did not start as part of a life company, for example Nucleus or Transact – comes down to leadership and innovation.

The white paper says pure platforms are generally started by visionary founders who then build a team around them and find ways to innovate while keeping costs low.

platform profitability
Source: Altus Consulting, “Giving your platform wings”

Altus has found that 47 per cent of pure platforms are in profit compared to 17 per cent of group-owned platforms.

In Nucleus’s latest results it reported a 19 per cent increase in operating profit to £5.1m for the 12 months to 31 December 2017.

For the 12 months ended 31 December 2017 Royal London-owned Ascentric recorded a loss of £32.7m while Aviva’s platform reported a loss of more than £13m in 2017.

Altus says more than 60 per cent of group-owned platforms have never reported a profit, with the rest of that cohort switching between profit and loss annually.

Altus says issues for pure platforms have come through trying to scale their businesses to deal with greater business volumes and that even the most profitable of these firms have operational problems behind the scenes.

For provider-owned platforms, overspending on projects and decreasing margins have meant profits have remained elusive.

Since Altus last ran a similar report in 2011, assets in the platform market have grown by 180 per cent.

From 2011 to 2016 total revenue in the market grew 22 per cent but revenue as a proportion of assets dropped from 54 basis points in 2011 to 24 basis points in 2016, which shows continuing pressure on margins.

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