Platforms may be growing more homogeneous, says Richard Bradley, a research director at Platforum. But with advisers’ needs differing significantly, this is driving platforms to introduce many capabilities that often appeal to just a limited range of users, he adds.
“For example, 29 per cent of firms say pre-funding is essential for all their clients, but 22 per cent of advisers report that it’s not at all important for their clients. Platforms are therefore pulled in different directions by different users, making it hard to appeal to all users simultaneously while also keeping a lid on costs.”
Indeed Michael Reid, head of platform insights at Fundscape, a research house, cites an example of a smaller platform in the market that ranks well on satisfaction metrics among advisers.
“It's a much smaller model, but it's run for a specific group, and efficiently. So it's sticking to what you know, being good at efficiency and delivering what you say you're going to do.
“There's a multitude of different advisers, and no adviser firm is exactly the same. So it's trying to deliver a big enough platform capability for enough of that particular segment of advisers.”
Martin Barnett, head of content at Fundscape, also says: “Incumbent companies have to optimise their model, their approach, refine their target market, and be clear about how they want to address what they see as the opportunities.”
Is consolidation on the horizon?
Platform acquisitions may have been du jour in recent years, but with Warren at Altus Consulting describing adviser platforms as a mature market, could further consolidations be in the pipeline?
“It is difficult to gain share, albeit ad valorem charges offer some protection through compounding revenue growth in bull markets,” Warren says. “That places an emphasis on dealing with change to drive efficiency to lower cost, which creates a dynamic in which size and scale increasingly matter.
“Evidence of the latter can be found in the most recent Fundscape Q2 report, which shows that the winners in terms of net sales are the £50bn-plus platform cohort. If this continues, you can foresee a market ripe for consolidation.”
But Warren also notes that M&A activity is suppressed by the prospect of complex migrations and assuming the outcomes risk in a market shaped by the consumer duty.
Bradley at Platforum agrees that platform consolidation may not be imminent, but notes how advice firms themselves are cutting down on the number of platforms they use.
“We are hearing more and more advice firms say they either aim to use fewer platforms, or they are already consolidating their clients’ assets; 83 per cent of advisers now use between one and three platforms,” he says.
