There are some big changes happening under the surface in the platform market at the moment. With all of the excitement around the pension reforms currently it is easy to forget about the shifts in platform technology that are either in progress or on the horizon. And it is even easier to overlook the impact these changes could have on advisers and their clients.
Over the past few years we have seen a number of platforms announce moves in their technology. For example, Old Mutual Wealth announced that elements would move to IFDS. Ascentric, Aviva, FundsNetwork and Nucleus have moved, or are moving to, Bravura. And Alliance Trust Savings is using GBST. That all adds up to many billions of assets under administration, with very few platforms now operating wholly on their own proprietary systems.
Platforms are complicated bits of kit, so getting the move itself right is hugely important. Nucleus had a few hiccups during its move in 2014, which resulted in having to compensate customers for problems with some trades. Adviser reviews of the platform also dropped, in particular for online tools and customer service (though we would note that the platform is still highly rated by its users). Platforms making the same move are, naturally, being cautious and taking it slowly.
But what about the longer-term implications? With the right technology, running a platform is a scale game: every additional pound should mean more profit (or, in some cases, less loss). However, if it is costing 31 basis points to service assets that are being charged at 30bps, then you have a problem that no increase in assets under administration can solve. Whether a platform is outsourcing or not, operational efficiency is vital.
This is made all the more pertinent when considered alongside the reforms we have seen to retirement. After the 2014 Budget announcements we saw quite a few platforms reduce or abolish flat Sipp charges for drawdown and other such services in order to attract pension business. In many cases investors are now only paying percentage-based platform charges. But as anyone who has taken a peek into numerous platforms’ offices will have noticed, the bank of desks that deals with Sipps typically comes with plenty of paperwork. This could cause some serious problems for a platform that finds itself with too many low value clients and too much manual re-keying.
So how are advisers responding to these changes? In our adviser survey this month we asked them how platform technology shifts were factored into their platform due diligence. Only a handful said they regarded it as particularly significant. Most were content if the platform appeared to behave as it should and integrated with their own back-office system. Only one adviser mentioned any specific back-end provider at all.
The next year or two is likely to see a fair amount of disruption in the platform world. As such, it might be helpful for advisers to find out:
– When and if the platforms they use are aiming to make the transition
– What their plans are to mitigate the disruption
– How long the changeover is likely to last (and then add a bit on for safety)
– What the advantages should be for users when it is all over
Advisers should try to avoid being locked into platforms that are all transitioning at the same time.
Richard Bradley is head of data at The Platforum