uk is jupiter italy saturn in first map of europes

At the end of September 2011, open architecture advised platform assets in Europe’s five key platform markets  totalled €560.8bn (£450.6bn ), according to the Platforum, the London-based platform consultancy, which said it believes its research to be the first to take a comprehensive look at the European platform market.

“Including international platforms active in Europe, we estimate that there was €740bn in the advised open architecture platform market in Europe, as at [the end of the third quarter of] 2011,” Platforum said in a summary of the report’s findings.

The European Platform Guide focused, however, not on international platforms but on domestic platforms “supporting open architecture fund distribution via a financial intermediary” in the UK, Italy, Germany, France and Spain.

Looking at the European platform market as a “solar system”, the Platforum’s researchers  see  the UK as its “Jupiter”, due to its large asset levels and a perception by its “continental cousins” of being “full of hot air and inflated self-importance”. Italy, with its “ring of big banks around it”, is Saturn, while Spain, with its tiny market (and heat), is Mercury.

Among the key trends the report’s researchers identify is a move towards integration of asset management and platforms, as well as a growth in the direct-to-consumer platform market.

Growth is also seen coming in the independent financial advice channel, which heretofore has not been as developed in much of Europe as it is in the UK, though “IFAs are yet to make significant inroads in Spain or Italy”.

The Platforum managing director Holly Mackay said the research revealed “a gradual convergence across Europe, as once very disparate platforms move towards guided architecture models”.

“We have seen a subtle shift away from platforms arguably working for fund managers, with a renewed focus on supporting their distributor clients – a move which will be enhanced by changing revenue models as ‘living off’ rebate diminishes.

“Vertical integration is returning, but this time it’s distributors taking on discretionary asset management in Germany and the UK. And slowly, slowly, we see independent channels on the rise in France and Spain.

“Different planets, yes but still part of a single solar system which is looking increasingly consistent.”

Five dominant players

Allfunds Bank, Cofunds, Fidelity, Fund Channel and Skandia are Europe’s five largest open architecture platforms, each of which administers “more than €35bn” in third-party funds, the Platforum data shows. In the case of Fidelity, it is helped in this regard by its ownership of Germany’s Frankfurter Fondsbank, “which makes this group the dominant platform parent across Northern Europe,” with combined UK and German assets totallying €56bn.

Spain’s Allfunds Bank, meanwhile, “rules the roost in Southern Europe, with total assets of €55bn”.

Other key points in the report:

• Platforms are the most prolific by numbers in the UK and Germany, which are also the most “retail”, as opposed to institutional, platform markets
• Platforms are fewer in Spain and Italy, which are the continent’s most institutional platform markets; Italy is “as institutional as it gets”
• The UK platform market has been very retail in its approach to date, building services which can be taken off the shelf and used by an individual adviser client; but “this is changing, and institutional platforms are supporting larger IFA distributors [seeking] to build their own platforms”.
• “Charging models are still largely rebate driven”
• An “embryonic IFA market” has begun to develop in Switzerland – traditionally a market well-served by private banks – a response, the report says, in part to the high turnover in such banks among relationship managers

In conducting its research, the Platforum spoke to more than 40 platforms operating in eight jurisdictions, working from data supplied both by the platforms themselves as well as by talking to “informed market participants”. Most of the figures are from the end of the the third quarter of 2011. 

The Platforum’s European Platform Guide was carried out in conjunction with Schroders. The Platforum said it will begin researching a follow-up to its report in September, for publication in the first quarter of 2013.