M&G and Lloyds Banking Group are among a number of names to have acquired a platform in recent years, having bought Ascentric and Embark in 2020 and 2022 respectively.
But four years after acquiring Ascentric, M&G announced it would exit its adviser digital platform as part of “focusing the business”. On the other hand, Scottish Widows has merged its adviser platform and workplace businesses under one team.
Meanwhile, Tatton Asset Management chief executive Paul Hogarth recently told FT Adviser the business had considered becoming a platform, but abandoned the idea.
Against the backdrop of M&G’s exit and Scottish Widows’ consolidation, the decision raises a wider question of whether the market for adviser platforms has reached a point of saturation.
“The platform market is a highly challenging industry to operate in,” says Jonathan Warren, head of innovation at Altus Consulting. “Competition is intense, margins are thin, and there is minimal scope to exceed the market threshold on fees for a service that has become a commodity.
“Throw in regulation, scrutiny on revenue sources, and a continued need and demand for better service and investment in technology, and the choice to enter the market is difficult to stack up…The market is in maturity.”
Traditional vs adviser-as-platform
Emma Napier, consulting director at NextWealth, a research and consultancy practice, agrees that growth in the general platform market has slowed.
But she also points to the trend of firms, especially larger ones, looking to become platform operators themselves. “So I think in terms of saturation, yes for the traditional platforms, but no in terms of the new nuances of platforms being launched by advice firms,” Napier says.
She adds: “I think it's really hard for the traditional platforms to differentiate themselves. I think that it’s been an ongoing issue with some of the traditional players… And there are different models on the horizon.
“Now, you've got the ‘adviser-as-a-platform’ model; you've got the Seccls and the Hubwises working with advice firms to differentiate themselves. And then you've got the traditional players that are saying, ‘We're really strong on service. We've integrated everything. We're taking the cost. What more do you want?’”
“You've got these larger advice firms that are increasingly turning to their in-house or bespoke model, which is going to put the pressure on the traditional third-party providers, because they're slower to adapt.
“If you're an adviser firm that’s looking to run and own most of the value chain, including the platform, then it's likely you've got much more control over the growing and retention of assets, because you're much more involved in the combined process.
“If you think about it the other way, you might have a good relationship [with your platform], your costs might be great, but the third-party platforms are always on that sort of periphery of, ‘If my service falls, then advisers could vote with their feet, and I'm out.’ So the risk still remains with the traditional players, and less so with the bespoke ones.”
