Prior to its recent M&A activity, the company reported assets under administration of just under £20bn, and profits of around £2m, the latter number being too small to enable the firm to embark on the technology upgrades and other initiatives that it needs to embrace in order to benefit from greater scale.
A long-running issue in the advice market is that it is often a lengthy process for advisers to switch clients to a new platform, which means growth in recent years has largely come from the expansion in the total number of clients and from portfolios growing in line with rising markets.
The other challenge for platforms is the difficulty of moving between providers, as doing this can take up a lot of advisers' time, and they cannot bill a client for it.
Hammond says: "The issue of making it easier for advisers to move between platforms has been around for a long time. One of the issues is that if an adviser wants to move, in most circumstances for regulatory reasons the adviser needs to speak individually to each client of his or her advice firm to explain the rationale for moving.
"That is obviously very time-consuming for the adviser, and then they have to embark on the technical work to make the changes. That is a lot of time and resource, and it does have the effect of meaning advisers don't readily change platforms.
"One of the problems with the legacy Nucleus business is they didn’t really have a unique selling point. They were reasonably priced, and well liked by advisers, but there is no doubt they needed to evolve. The assets growth of the Nucleus platform in recent years has come from the acquired businesses. ”
But Nucleus's problems run deeper than market turbulence. As far back as 2019, David Ferguson, the founder of the company, highlighted how consolidation among advice firms was contributing to higher outflows from his business.
Ferguson essentially co-founded Nucleus in conjunction with advisers who became shareholders, which meant the platform may have been particularly vulnerable for having an older cohort of advisers in its business. And it is firms run by older practitioners that are more likely to sell to a consolidator.
What next?
The acquisition of Nucleus by James Hay turned the £19.8bn of assets reported in the most recent set of accounts into a figure which as of today is £43bn, and if the Curtis Banks transaction is formally approved this would take the assets under administration of the combined group to around £80bn.
Central to Nucleus's communications around the company’s strategy is that it needs to have the advantages of scale in order to invest for the future, with around £5mn targeted to be spent on what the company believes are improvements to the platform since 2021, and an overall target to have spent £8m by the end of 2022.