Large advice firms and PE-backed acquirers are increasingly likely to set up in-house platforms, a report by NextWealth revealed.
Businesses with assets under management (AuM) between £250m and £499m ($616m, €570m) are the most interested in doing so, with 28% having plans in place to set up their own platform – 6% of which already having started the process.
They are then followed by 24% of firms with £500m in AuM or more, and 17% of those with less than £250m AuM.
This is up from 2021, where 18% of firms with AuM of £250m or over shared intentions of building their own platform.
Heather Hopkins, managing director of NextWealth, said: “Competition is fierce among platforms at the moment. Incumbent players are being pressured to modernise and evolve their propositions to suit a pressing need for flexibility and digitisation.
“Particular pressure is being felt from the adviser segment we’ve labelled ‘investment outsourcers’. These firms represent 20% of the existing adviser market but are growing rapidly through PE-backed acquisition. They are most likely to have plans to build their own platform – we predict about a third of them will have achieved this within the next three years.
“While we expect a third of these larger firms to adopt the adviser-as-platform model, we think they will maintain a multi-platform strategy to support a wide range of customer needs.”
Hopkins believes there are two main drivers for this:
- The number of new clients has slowed, meaning firms have more resources to focus on tech and operations; and
- The upcoming Consumer Duty is leading senior managers to want more control and oversight on client outcomes.
But platform providers are not resting on their laurels, NextWealth discovered, as many are enhancing their propositions with ‘bolt-on’ services.
Some of the additional offerings include supporting regulatory compliance and operational efficiency for advice firms.
Examples of evolving services provided by platforms, according NextWealth, include:
- Fidelity Adviser Solutions partnering with Conquest to offer planning tools and digital onboarding;
- AJ Bell becoming one the fastest growing providers of discretionary MPS (both by percentage and net asset growth) three years after launch;
- Intergrafin (owner of Transact) buying back-office system Time4Advice and launching a range of model portfolios with BlackRock; and
- Novia and 7IM are offering access to unitised annuities.
Hopkins added: “Advisers who are motivated to build their own platform because of frustrations with limitations offered by existing platforms may want to take a closer look at what is happening within some of these firms.
“There is so much investment and innovation going on and we expect many to leave the ‘old model’ label behind.”