Transact chief hits out at argument all platforms are the same and the market’s focus on price
Though usually unflappable, there are several things currently bothering Transact chief executive Ian Taylor.
One is the fact the term “platform” is not well defined, especially because
not all platforms are the same.
This is of particular note with regards to the recently announced FCA investment platform market study.
Taylor says: “If you lump all these businesses together it will cause problems for some of us.”
One criticism levied at platforms is that they should use their buying power to negotiate better deals with fund groups. But Taylor counters that notion.
He says: “Do platforms encourage competition by negotiating terms with fund companies? I tend not to. I’m a custodian – I can’t promise how people will invest this money; it’s not mine. Others with guided architecture may find it easier to negotiate because they can drive assets to particular funds. Not Transact.”
Another thing concerning the chief executive is the “GoCompare mentality” in platform comparison.
“It’s as if the only thing that’s different is price. There are lots of different business models,” he says.
Some have suggested platform charging would drop precipitously if the adviser were paying the platform fee. But Taylor is adamant the investor should pay, as it is the investor that benefits.
He uses the example of the provision of the tax wrapper. “Should the adviser pay for Mrs Miggins’ tax wrapper?”
This is a point of difference. Transact can be the platform for both direct and advised assets. Adviser charging can be done by tax wrapper. If Mrs Miggins has direct equities and the adviser does not want to advise on those, she can still keep those equities on Transact. And Mrs Miggins gets full access to the platform, as she pays for it.
Taylor says: “Imagine me as an NCP car park manager. I am not distributing the cars. I have BMWs, Mercedes and the rest on the lot. I don’t care which one you park as long as you pay me. But the regulator says because I have all these cars in my car park I am a car distributor.”
From Charles Dickens to client custody
Such reflections on technology, finance (and car parking) are a long way from those he made on the likes of Milton, Chaucer and Brontë while studying English literature at Cambridge University. He graduated with dreams of writing the next great novel.
Marrying straight out of university, Taylor and his wife moved to Lincolnshire, near her family. After a futile year with plume and parchment, he realised he was less creative and more analytical, and gave up his dreams of being the next Charles Dickens.
He “fished around for a job” and in 1987 joined Royal Life. He spent five years there before moving to the City to be marketing director of a small asset management company, John Govett.
In 1998 he met “some guys from Australia”, including Transact chairman Mike Howard. They owned a software company and saw an opportunity in the market. April 1999 saw Taylor’s first foray into the platform industry.
“My career in platforms is now old enough to buy a drink,” he says.
The longest serving platform, Transact’s first case was written in March 2000. “It was a brilliant idea,” says Taylor.
“People have already forgotten what it used to be like before platforms. They have become part of the infrastructure. Cast your mind back to the heady days of 1999. If a client had a pension, a Pep and 10 fund holdings, it could take weeks for an adviser just to get a valuation. Now clients pay advisers for advice rather than for chasing insurance companies for valuations.”
Taking the pressure off price
Taylor is keen to point out that platforms have also brought down the cost of investing.
“In the old days, to switch from one investment company to another incurred a 5 per cent charge. If the adviser was really kind and rebated all his commission, it would still be 2 per cent.
He says: “If I were the regulator I would be more concerned about vertical integration than about pricing alone.”
Taylor sees the move to vertical integration continuing but is encouraged the regulator is taking an interest.
“The people I feel sorry for are the clients. One week Mrs Miggins is invested in these funds across these tax wrappers on this platform, and the next week she is in different funds, in different tax wrappers on a different platform. How have Mrs Miggins’ circumstances changed to warrant that?”
He readily admits vertical integration poses a risk to Transact. Yet he believes the two models can exist side by side and is optimistic for a thriving independent advice community.
Looking back on his career, Taylor says: “Sometimes it feels like five minutes; sometimes it feels like an entire lifetime. Transact is the best thing I’ve done in my career. I’m genuinely proud. We have introduced real ethical value.”
In other words, less hard times than great expectations.
Heather Hopkins is head of Platforum.
She can be reached at firstname.lastname@example.org
1992-1999: Marketing at John Govett Asset Management
1987-1992: Various roles at Royal Life