The platform industry has taken great strides in the past few years. It has had to deal with regulatory changes and an upheaval of the pensions industry, but the end of change is by no means in sight.
Rumours have been rife in recent years that consolidation would be the key continuing theme in platforms. Finally, in September 2015 it was announced that Aberdeen Asset Management was set to acquire Parmenion in a move the fund house said would help accelerate its “digital ambitions” and augment its investment solutions business.
In May, the first major piece of business was completed to combine two platforms when Standard Life bought AXA’s Elevate platform for an undisclosed sum.
Barry Neilson, business development director at Nucleus, does not predict a significant amount of consolidation in the market any time soon due to the difficulty in bringing the differing propositions together.
Mr Neilson said, “We can not see continued consolidation of significant magnitude. It is more likely that we will see a change in ownership with external participants like fund managers being the main suitors, such as Aberdeen’s purchase of Parmenion.”
Steve Levin, chief executive officer of investment platforms at Old Mutual Wealth, agrees. “While there has been recent M&A [mergers and acquisitions] activity among platforms, I do not think we are about to see a spate of consolidation because it is not a simple exercise.
“It might take 18 months or more to integrate different platforms, even if the technology is the same, as the fee structures and tax wrappers need to match up.”
The rise of robo advice
Another area of platforms that has been taking up many column inches in recent years has been the rise of robo advice. While there is still not a huge market, it is still relatively unclear just what exactly it is.
Essentially, a robo adviser is the same as a direct-to-consumer (D2C) platform except that it simply offers advice rather than guidance. The biggest concern is the safety of the algorithms and whether or not consumers will take the so-called advice seriously rather than assessing the risks involved with listening to machine rather than a human.
The way many industry commentators talk about robo advice suggests the robots are taking over the country and regular face-to-face advice and platforms, as we know them, are under threat – and the press is guilty of this scaremongering too.
However, according to the lang cat’s most recent report looking at direct platform investing in the age of robo advice, Come and Have a Go: Rise of the Machines, D2C platforms had roughly £132bn in assets under management (AUM) in 2015.
This is more than double the amount Deloitte estimates that the 11 leading US robo advisers held at the end of 2014 (£60bn).
As it stands, robo advisers in the UK stand at approximately £150m. A quick glance at Table 1 will show how small this is in comparison to the platform market – Praemium, the platform with the lowest AUM has £874m under management.
