The pensions dashboard could lead to platforms having to drop their charges as well as driving further consolidation in the market.
That is the view of pensions dashboard steering committee member and Finance and Technology Research Centre director Ian McKenna, who questions how much consumers will be willing to pay for a platform when a dashboard will show similar information for free.
The dashboard prototype, presented last month to Government by providers, will show a person’s defined contribution, defined benefit and state pension pots in one place. In time, McKenna believes this will be extended to show a wider range of investment and savings products and others predict the dashboard will also include information such as charges in the future.
McKenna emphasises the changes brought about by the dashboard would happen in time anyway, but the initiative is expediting those changes because of Government support.
He says: “What the current iteration of the dashboard will deliver is more information, better communication to consumers and give advisers greater access to the data they need so they can give advice more quickly and with a comprehensive summary.”
However, he considers the dashboard will have a financial impact on platforms, driving a drop in charges and acting as a catalyst for more consolidation in the market.
McKenna says: “In trying to quantify the financial impact on platforms the question to ask is if Government creates an environment where all consumers are entitled to see all their long-term savings in a single view, free of charge, what will clients still be willing to pay for platforms?”
He adds: “Many people have argued for some time that the primary benefits of platforms accrue not to the client, but to advisers through increased efficiency. As it becomes clearer that the adviser gains most from platforms, how many clients will be prepared to pay the current level of fees? Equally once platform charges become a cost advisers are expected to absorb how many will be willing to accept ad valorem charging?”
“To me it is inevitable that the emergence of dashboards will finally make the long-expected consolidation in the platform market a reality. Scale will become a more important issue than ever and in the long term it is hard to see a market of more than five mega platforms.”
However, others say platforms should not feel threatened by the dashboard because they will continue to offer services the Government-backed project won’t.
Royal London corporate affairs head Gareth Evans says the dashboard will initially be just an aggregator of third-party data, as opposed to a transactional tool.
Evans says: “An investment platform allows advisers and their clients to implement investment decisions through transactions and provide related administration services for the assets, as opposed to simply displaying their value. Advisers and their clients hold assets on platforms to aid the financial planning process, not to simply make it easy to see what savings they have.”
Director of consultancy Finalytiq Abraham Okusanya says the dashboard is not near the top of the list of reasons why platform platform prices might drop in the future.
He says: “The dashboard won’t show important information, such as charges, contributions and withdrawal from accounts, underlying funds, or asset allocation and whether the portfolio is on track to meet a client’s objectives.”
He adds: “Platforms do a whole lot more than reporting. Custody, administration and tax wrappers are key value that platforms provide. It’s really only a matter of time before platforms evolve into providing really powerful digital tools [for example] secure communication between advisers and clients, goal tracking and functionality for managing sustainable withdrawal in retirement.”