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Stacked up: Are technology providers up to the replatforming workload?

Fears grow over whether just four technology providers can handle the huge replatforming challenge

Platform technology providers are attempting to alleviate concerns that too few players in the market are taking on too much work.

Last week Old Mutual Wealth announced the cancellation of its replatforming contract with IFDS to switch to rival provider FNZ. A note sent to advisers by Old Mutual Wealth seen by Money Marketing says the project was hampered by frequent delays and issues with the quality of delivery.

With just four key technology providers backing the majority of adviser platforms, fears over lack of competition in the market abound.

One platform boss tells Money Marketing the FCA has concerns about the systemic risk surrounding platform technology providers and the impact on consumers if one of those companies was to face significant problems.

Is there enough competition in the platform technology market and do the current providers have the resources to handle the demand for the replatforming projects that are under way?

Four’s a crowd

There are four main technology providers powering the UK platform market: Bravura; GBST; IFDS and FNZ. But challenger companies, and providers offering propositions for different parts of the market, are increasingly establishing themselves.

Money Marketing approached all four companies to get their view on how concentrated the market is, how they win business and why the costs of replatforming projects have a tendency to increase significantly beyond initial estimates.

However, only GBST responded, with the other companies either not answering the request or saying they were unavailable to comment.

Each of the four main technology companies are managing a significant workload as adviser platforms make progress with their replatforming projects and banks and fund managers eye entering the platform and robo-advice space.

FNZ arguably has the heaviest workload of the four, particularly now it has taken on the Old Mutual Wealth project, which is expected to be finished by early 2019 at the latest.

As well as that project, FNZ is working on the Aviva platform migration from Bravura, it is building Embark’s new platform, and is understood to be working with retail banks Barclays and Santander on separate platform and robo-
advice propositions.

It is also building Vanguard’s direct-to-consumer platform which is expected to launch this spring. FNZ also powers both the Standard Life and Elevate platforms.

Australian-headquartered GBST is managing the Aegon/Cofunds technology upgrade, with the core of the new platform being based on Aegon’s Retirement Choices platform, which uses GBST technology. The existing Cofunds platform used IFDS technology.

GBST is also handling Alliance Trust Savings’ replatforming project, and both AJ Bell and Novia also use GBST technology for their advised platforms.

Since losing its contract with Old Mutual Wealth, the major UK replatforming project being run by IFDS is for St James’s Place. Last month, Money Marketing reported that project had already cost SJP £121.1m, with pension and bond business yet to be transferred and a retirement account still to be developed.

The main replatforming projects being run by Bravura, also headquartered in Australia, are for Ascentric and Fidelity’s FundsNetwork. Bravura runs the technology behind the Nucleus platform.

Competitive enough?

Commentators do not seem concerned about the level of competition in the market, despite the level of activity and specialist nature of the work being carried out.

Altus Consulting innovation head Adam Jones highlights other technology firms  that are offering similar solutions, for example, Babel, which sits behind the Nutmeg platform.

The Lang Cat principal Mark Polson points to SEI – which provides technology to adviser firms True Potential and Tilney – and Pershing, which sits under Seven Investment Management, as other providers.

GBST Europe, Middle East and Africa head David Simpson says there is no shortage of competition, with each of the current technology companies having its own strengths.

Simpson says: “Platforms are complex businesses and relatively few technology firms have the capability to take on the challenge of transitioning legacy systems, integrating bespoke technology and managing ongoing administration.”

He adds: “It’s important to remember that the systems we’re talking about have to be robust enough to deal with hundreds or thousands of customer records and billions of pounds, or other currencies, of their monies, holding it accurately and trading it right first time, every time. I wouldn’t expect dozens of competitors to be in a place to do that.”

Jones agrees for a “relatively niche market” there is a range of choice among tech providers, and exploiting the options available can help platforms differentiate themselves.

Jones says: “The real benefit is to be an engine room that powers trading, custody, settlement and cash management and empowers platforms to interact with clients as they choose too, for example, by putting your own front end on it or being able to tailor your proposition to fit your target customer base.

“Good technology vendors will allow you to do that so you can differentiate the platform proposition and also get the benefit that these things bring.”

Stretched thin

While competition in the market was deemed to be healthy, commentators were less positive about delivery and admitted technology providers are facing the challenge of managing resources to complete the multitude of projects on their books.

Polson says: “The skill of running these businesses is managing competing demands and I should imagine they are all pretty used to it. The busier you get and the bigger clients you get the more challenging that gets. Everything is a balancing act and with FNZ being busy at the moment they will be feeling that but equally you could argue that is the price of being successful. Same with GBST and Bravura, they have all got a lot on.”

Jones says the companies will be seeking to bolster their staff levels with support from external contractors and consultants.

He says: “What it really means is that the platforms who are buying in the technology need to have a clear view of what they are trying to deliver. Change programmes for IT are difficult and they are complicated, inherently. They are made more difficult if you do not have a clear roadmap and vision on what you are trying to achieve. That is probably the thing at a high level that will make the difference.”

Expert View: Same tech but platforms won’t look the same

Advisers are not typically concerned with the internal machinations of a life company and are more interested in whether the platform “does what it says on the tin”. On this, Old Mutual Wealth scores well. The firm ranked fourth in Platforum’s Q1 User Leaderboard for platforms over £12bn in assets, based on surveys with advisers.

Advisers give the firm good scores on web usability, usefulness of online tools, ease of doing business and technical support. The firm scores lower than its competitors in customer service and business development manager support.

Some suggest that all platforms will start to look the same as they increasingly use the same back-end technology. We respectfully disagree. Outsourced platform technology rarely runs entirely on trunk code with a universal release cycle.

Outsourced technology firms largely write branch code and different versions that are customer centric. For example, Standard Life Wrap and Elevate use the same provider but there is a general consensus that they are very different iterations of the same software.

Another way of looking at it: the Swiss company Swatch produces the mechanisms that go into around half the watches sold annually, including for luxury brands like Cartier.

But no one would complain there is homogeneity among watches – companies actively compete on the front-end design. So too do platforms vis-à-vis their back-end technology providers.

The Old Mutual Wealth replatforming with FNZ is due to be completed in late 2018 or early 2019. If Old Mutual Wealth cannot add some basic functionality to the platform until then, it will look out of step with competitors.

In particular, advisers tell us they want a cash account facility. The platform also lags competitors on functionality for discretionary fund manager model portfolios, and
may soon become the only platform that does not support exchange-traded funds.

Advisers who have a significant amount of business with Old Mutual Wealth might be able to use this as an opportunity to get an even sweeter deal with the platform. If the sparkplug works well, the car may win the race.

Heather Hopkins is head of Platforum.

Platforum recently interviewed the heads of major platform tech players for Money Marketing. Read their profiles of GBST here, IFDS here, SEI here and Bravura here

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