Platforms are “dead” in their current form, according to a state of the market report by consultancy The Lang Cat due to be published later today.
The report says the platform market is “struggling” and that Legal & General’s failure to secure a buyer for Cofunds raises questions about the sector as a whole.
The Lang Cat consultancy director Mike Barrett says: “Those questions are clearly being asked in Paris, as Axa Wealth also reportedly gets put on the market.
“Quite simply, we have a (relatively) small market, dozens of suppliers, fragmented distribution and considerable downward price pressure.
“There are wins to be had: profits to be made, but total domination of the sort that Axa and L&G want and expect just isn’t there.
“We’re convinced, then, that platforms – at least in the guise that we’ve known them for the last decade and a half – are dead.”
The report argues platforms need to evolve rapidly to ensure their survival.
Barrett says: “There is an urgent need to improve back office systems and processes to drive costs out of the business.
“Equally urgent is the need to improve adviser and customer online propositions. In several cases a platform’s customer portal requires you to use a PC with Internet Explorer, and even then you can only get a valuation.
“In a digital world customers expect much more and a number of direct platforms are starting to address this.”
The report also says platforms are not as well set up to support the pension freedoms as they claim.
It says: “In too many cases it’s far, far too manual, especially if you’re mixing up drawdown and withdrawals from Isa or GIA capital, for example.
“We’ve seen clients ending up with multiple small-ish payments each month, on different days of the month, some needing to be triggered by the adviser each time. That doesn’t sound like 2015 to us.”
It adds that providers are too focused on developing new products, and not enough on improving customers’ ability to manage their retirement income via a platform.