The greatest disruption to adviser platforms is likely to come from the emerging new players that look nothing like the incumbents. These firms are unconcerned with bells and whistles (stuff advised clients end up paying for even if they do not use them, because it all comes prepackaged and built into the #BigTech offering).
With some positive year-on-year performances among the smaller names, these guys are starting to outpace the more traditional, large-scale platforms in service and asset growth. The law of small numbers applies here, but it also indicates the direction the market is taking.
We reckon one of the biggest themes over the next five to 10 years will be ‘adviser as platform’. This type of white-label platform used to be associated with a small handful of big firms like Succession, Tilney and True Potential. The market was dominated then by three firms: IFDL, Pershing and SEI. But over the past year, new offerings from Embark, Hubwise, Multrees, Praemium and Seccl have started to gain interest.
All of these names are charging a lot less than the more established platforms, which is naturally a big draw for advisers and also fits with the FCA’s ambition to reduce the total cost of investing for clients. The sharper deal-making from the traditional retail platforms is responding to this pressure.
Within this new cohort, we see a range of offerings. Some are light touch and require the adviser firm to create middle- office servicing functionality.
Some cost a bit more but offer that service. Some ask the firm to make new decisions, such as which third-party, front-end system or custodian they want. Some need the firm to be discretionary.
These offerings tend to require the adviser firm to do more of the initial legwork but, in exchange, they give advisers the flexibility to personalise their platform and, in some cases, even take on the role of platform operator.
And that is what we mean by fragmentation. We know now what the price of basic custody, dealing and administration is thanks to these guys – it is around 0.15% or lower. Everything else you or, more accurately, your clients pay is for the ease of additional support and functionality. Whether it is a premium wrap at 0.35% or a skinnier one at 0.25%, you know where that money is going and you can make a judgement. That is going to be important in light of the increased requirements to demonstrate why a particular solution is relevant for a particular target market (see Prod 3.3 for more).