Consumer duty, vulnerable customers and operational resilience are three themes which should take up a lot of focus for UK platforms in 2022, says consultancy firm AKG.
The competitive nature of the platform sector means that the dynamics and make-up of the space are ever-changing as companies look to out-do their competitors.
The UK market may be more developed than the international arena, but it doesn’t mean that they won’t suffer from the same problems in the next 12 months.
A spokesperson for AKG said: “There are a number of trends and characteristics, including challenging ones, affecting or influencing both the relatively established UK platform sector and the ongoing development and growth of the international platform sector. Many of which are common to both.
“These include behavioural and regulatory aspects as part of their operating environment. From a regulatory standpoint in the UK, consumer duty, vulnerable customers and operational resilience are three themes which should take up a lot of focus.
“From a more general perspective, but in some way linked to the latter of the regulatory items, perhaps a standout area for many is around the challenging requirements to reach and then operate effectively at sufficient scale in a competitive market. Within which the ability to deliver and then maintain appropriate technology is central.
“These two markets are at different evolutionary stages and lessons from, for example, the UK platforms, on the cost and effort of re-platforming, to deliver suitable ongoing adviser experience through the technological infrastructure, remain front of mind for that market and must also be considered as pertinent in the growing international arena.”
Choices
The international platform market may not have many businesses – but does this necessarily mean the space is difficult to explore for advisers?
“The international platform sector remains young, but drivers for growth are very present,” AKG said. “Certainly, existing platforms, whilst few in number, have capacity to absorb more business.
“They have been built in anticipation of market growth and whilst there are variances, in aggregate across the current players, there is scalability.
“As the market grows it will no doubt pique further interest with the potential for new entrants, should they be able to overcome both the costs of entry in terms of technology and to specifically understand international market requirements; neither of which should be underestimated.”
Praemium
One big development for international and UK market is the proposed sale of Praemium International to Morningstar.
It was not a buyer that many in the industry expected, and Morningstar has shown its commitment to the wealth management market with a newly established unit.
AKG said: “Whilst something of a niche platform in the UK and with the international platform market still at a relatively early growth stage, the sale of Praemium is an interesting illustration of some of the developmental currents present within both markets.
“Notwithstanding a refocusing to its home ‘core’ by Praemium’s previous Australian owner, the sale is reflective of the significant appetite for businesses with this focus in the market, which whilst at different stages, are subject to attractive dynamics.
“Specifically, in Praemium’s case, the interaction of platform and discretionary investment management capabilities speaks to the diction of client requirements and adviser approach.
“Certainly an interesting transaction amongst quite a wave of broader M&A, which shows no signs of slowing, and this interest will continue as the next stages of business and proposition development under Morningstar play out.”
Competition and rivalry
With new players entering the platform markets in the UK and internationally, firms need to stand out.
Advisers have options – and they will make sure they can get the most for their clients’ money.
So, how will platforms compete with each other?
“It is fascinating that so many platforms seek to differentiate on many of the same things, and cynics may conclude that this will not always add up for all participants as a result,” AKG added.
“However, service and technology, backed by operational resilience/strength, are killer attributes, which, and clearly they are closely connected, if they can be delivered and maintained at a level clear of the pack, are the Holy Grail in terms of enabling intermediary firms to create business efficiencies and provide compelling propositions to clients.
“Outside of this, some specific platform features do also matter, and greatly so to certain adviser business depending on their model. Particularly in more niche areas. For example, in the international environment, genuine multi-currency capability.
“In the UK, those platforms actively taking up the baton with the development of more devoted propositions helping firms to service clients at- and in-retirement, as well as with later life and intergenerational wealth transfer are likely to stay ahead of the pack.”
Impact
For a long time, price has been a big factor for choosing platforms.
And AKG says that this still has not changed despite tech advancements and greater range of offerings for advisers.
“Simply put, for some time it has been big in the UK and is signposted to be the same direction of travel, at least in the medium term, for the international market,” the consultancy firm said. “Price pressures are similarly being experienced in asset management/discretionary fund management.
“That said, an understanding that a race to the bottom is neither helpful or sustainable has grown and a realistic distribution of costs along the value chain is increasingly understood as more sensible.
“Whilst acknowledging that it is incredibly hard to judge, value for money is the term on people’s lips. Transparency in pricing is vital and should be or become an absolute.
“Currently, in the UK market some schism in platform models between the established ‘full fat’ platforms and the newer more ‘un-bundled’ offerings for white labelling also adds a further interesting colour to this debate on price and value for advisers.”
What are advisers looking for?
In looking for a platform, advisers are embarking on a long-term relationship, which must be a partnership, AKG said.
“Getting the fit, on behalf of their clients and consequently that also matches the evolution of their business model and service proposition is therefore key,” the firm added.
“The most important thing and one that is always worth coming back to, is the client. Ultimately, advisers are looking to provide the best possible service experience and set of investment/retirement outcomes for their clients.
“Platforms can certainly be a core component in this, and so finding and matching platform(s) selection to these needs, which may well vary adviser firm to firm, will be paramount in 2022 and beyond.
“For some this will mean continued growth and development of existing platform relationships whilst for others this may require development of new platform relationships.”
