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“That’s not a moon. That’s a space station.” Vanguard launches; the Rebellion weeps.

After much market rumour and anticipation Vanguard have lifted the covers on their direct offering for the UK market. With The Sunday Times helpfully writing an advert for them over the weekend it certainly appeared that the launch was imminent, and finally the big day has arrived.

First reactions? It’s cheap. Seriously so. The account fee of 15bps, capped at £375 (more on that later) is way below every other platform bar fixed fee offerings for very large portfolios. By the time you add on the already low fees for Vanguard’s LifeStrategy funds or their ETFs the total cost of ownership blows every other planet out of the sky. It’s as if millions of fund managers suddenly cried out in terror, and were suddenly silenced.

If you are a Vanguard fan, and price sensitive, then you won’t need any convincing. You’ve probably already invested. However in the real world not many people are either, let alone both. Vanguard will no doubt be hoping the launch publicity will help build their profile, and of course costs (lack of) is a key component of this messaging. Their website explains this in some detail, but you can’t help but wonder if there is more to come. The magic power of compounding means the long term impact of a cheaper platform can be huge, both in charges paid out and actual returns gained. A more aggressive approach here could really help ram home the point about charges. Perhaps Vanguard are keeping their powder dry for another day.

I also wonder whether they have left a bit of wriggle room on the platform fee. 15bps, capped at £375 (more on that soon, promise) is cheap, but it’s not rock bottom. As disruptive as this pricing might be, there does seem to be room to become even cheaper if required.

So, what does this mean for the rest of the industry? Threat, or opportunity? For some it should be the latter. Evidence from the States shows that when Vanguard (and the other major houses, Charles Schwabs and Fidelity) launched the start-up “robos” received a boost as they effectively surfed the wave of publicity. For most, this was a short lived boost, however for some there is a chance to differentiate their service from Vanguard offering. Deep down, this is just another fund manager launching a direct offering (albeit one with several trillion AUA) and whilst the product is currently performing well if you invest with them you are constrained to only using their funds. If something happens to these funds and they no longer are performing well, or your circumstances change, you and only you can do something about it. The service proposition that some robos, such as Scalable Capital, Nutmeg etc offer, whereby the portfolio is constantly monitored to stay aligned to your chosen risk level will for some investors remain a more attractive and suitable option. These firms will welcome the spotlight on the direct investing market, and will hope to attract new customers as a result.

Whilst this launch is aimed at the direct market, the threat could well be felt most in the advised space. Fundscape report that Vanguard were top for net sales on platforms in 2016, with LifeStrategy 60% the 5th best selling fund. The £375 price cap on the direct offering means that potentially a large number of clients will be better off in cost terms moving from their current advised platform to the new direct one. Obviously this is a sweeping statement, and there are limitations, most notably the lack of a SIPP wrapper, the constrained fund range and (ahem) the lack of adviser charge functionality, but if a client is happily invested in, say, LifeStrategy and nothing else, then the cost savings could be huge.

For example, for a £1m client the market average for advised platforms is 22bps (for ISA), therefore creating an annual platform charge of £2200. Or put it another way, an annual saving of £1825 if you transfer to Vanguard Direct. For 500k it’s a similar picture. Advised market average is 26bps, so an annual saving of £908 if you move. Vanguard might be aiming this launch at the direct investor, but the advised market can’t ignore it. Platforms with large books of Vanguard business will doubtless be keeping a close eye on net and gross flows over the coming months.

Overall this feels like a big moment, and almost certainly the biggest launch of the year. If this results in a shift of investor behaviour akin to the one taking place in the States, where Blackrock and Vanguard are eating everyone’s breakfast, lunch and dinner then this launch will be a pivotal moment. We’ll be watching closely to see what happens.

Oh, and once the FCA are out of purdah next month we are expecting the Asset Management Study final paper. Could be a good time to launch a low-cost investment offering….

 

ISA ISA BABY

To the extreme I rock a mic like a vandal

 

 

 

 

 

Last week saw the latest release of ISA stats from HMRC. These figures come out every 6 months or so, and against a backdrop of the household savings ratio being at a generational low they don’t make pleasant reading for anyone involved in the investment industry. Over the last year, £120 billion was put in cash ISAs, compared to £43 billion into stocks and shares ISAs. The number of subscriptions was down, the total amount subscribed was down, and cash still rules. Ouch.

Already we’ve seen the usual provider hand wringing, bemoaning how people are choosing to save into cash rather than investing in (their) stocks & shares ISAs. More often than not these messages are clearly self-serving, but they do have a point. People are not saving enough, and a good proportion of those who are could be doing more with their money. The reality is that if you are involved in the investment industry, whatever you are doing to try to convince people to invest isn’t working. Stop. There needs to be a different approach.

For things to change, the industry needs to (collaborate and) listen to what these ISA stats are really saying, and then attempt to communicate to customers in a different way. Loss aversion is an increasing problem. The fear of loss is outweighing the positive of potential gains, even in an environment where a loss in real terms is a certainty by saving into cash. The FCA’s own consumer research is showing that people tend to focus on the here and now, and are using less structured and more personal decision making. Providers need to recognise this and start to build solutions that offer a more gentle step between cash and the scary world of investing. Crucially, providers need to explain risk to customers in a way that resonates, not alienates, and the regulator needs to help make this happen.

A quick glance at some of the emerging online propositions, most of whom will have gone through the FCA’s Fintech programme in some shape or form reveals an almost uniform approach to suitability and risk assessment. Almost every proposition I’ve seen, ranging from the smallest start-up to high street banks have a linear process whereby you are recommended to hold 3 months’ salary in cash “for emergencies” and then are taken through a risk questionnaire. Most explain risk in terms of volatility, however very few actually quantify the potential for loss. You are left to decide what being “balanced” actually means, and whether this is how you want to invest your hard earned. No wonder people stick with the comfort blanket of cash.

If people are going to be encouraged away from cash these systems need to evolve. For most investors risk is not about volatility, it’s much more personal. The risk of saving/investing inappropriately, the cost of delay, not actually doing anything can in some cases cause more damage to the end outcome than whether you are a risk level 4 or 5, yet I’m still to see anyone explain this to an investor in a way that allows them to make an informed decision as to the risk/return trade-offs they are willing and able to make. There are some bright spots of innovation, for example the Moneybox investing app that rounds up your spending to the nearest £ and then allows you to invest the proceeds, or Get Chip which automatically saves for you, and I wonder if this is where the answer lies. More personal, more accessible, easy to use to the point of being automatic. Getting people to save and invest intelligently, or at least with some sort of discipline, and removing the need to think about it too much. Maybe this is where providers should focus their efforts, developing new innovative solutions, instead of the old tried and tested methods, which based on current evidence seems to be failing all concerned.

 

 

SUB-DATAGASM! NEW TECH MARKET SHARE FIGURES RELEASED!

Hello, you.

Right, further to our lovely infographic from the other week, we need to update the tech provider projected market share figures. While we’re at it, we took the time to really make some additional changes and widen the set to give a fuller view of the market. We’re still not breaking it down by individual providers; that’s for another (much bigger) graph.

A quick health warning. The ‘future’ graph below is done on constant market share terms. That is to say, we assume the market size and split between providers remains constant over time. So if we know, for example, that one big adviser firm is planning to move £500m from here to there, or whatever, we don’t include that. This only includes replatforming activity that is in the public domain. So the future look is literally just to show how the current market split by tech provider changes once all the existing replatforming gigs work their way through the system.

In this version we have:

  • Brought all of SEI’s £32bn of advised assets in (included in Proprietary/Other)
  • Brought Pershing’s advised assets in (included in Proprietary/Other)
  • Brought HL’s Portfolio Management Service in (all Proprietary/Other)
  • Brought SJP’s book in (25% on IFDS already, the rest still to move from, you guessed it, Proprietary/Other)

So here we go for the current picture:

And here’s the future one:

Things to note: look at what a difference the SJP move makes. The Prop/Other future pie slice in this future look has a lot of SEI in it, along with some stalwarts like Transact and others. The IFDS slice shows Cofunds coming off (onto GBST), and SJP coming on – it is 14% of the whole market by itself.

If we were projecting how the market will actually look, rather than this artificial spool forward, we’d expect to see a lot more SEI and other facilitator-style platforms in there, as you can read here and here.

And that’s it for now. Hope it’s useful.

OMG, OMW! WHEN REPLATFORMING ATTACKS.

One of the running sores of the platform industry, for a long time, has been replatforming. This is a typically abstruse[1] term coined by the industry for moving the underlying assets on a platform from one technology firm to another.

Sound simple? Well, it’s not. I’ve been fond of saying for a while that ‘there is no recorded instance of a replatforming going well’, but I’ve always known that at some point someone would land a good one and prove me wrong.

Today is not that day.

Old Mutual Wealth announced today that it is severing its 20-year sweetheart deal with IFDS, a year or so before it was due to start delivering new platformy goodness into adviser firms. It is £330m into the build, and 5 years or so have gone by since the early stages of the project.

Instead of IFDS, OMW has reduced its alphabet soup count by one and gone for FNZ. The implementation date goes out by a year or more (we’d expect 18-24 months) and the costs are expected to be £120m-£160m (we’d expect a good bit more than that). This will please analysts, who have already factored in the disclosed £450m expected replatforming cost (and presumably allowed for an overrun as well).

So this is a very good day to be working at FNZ – and congratulations to them – but a very bad day to be working at IFDS. What I’m not sure about is what kind of day it is if you’re working at OMW. The guys there have got pads and a helmet on, of course, and the narrative from OMW Towers is all about going forward from here.

On the one hand, that’s exactly the right thing for them to be doing. Whatever your view on £330m of ultimately futile spend and thousands of work days wasted – and we could say plenty – the fact remains that when you’re dealing with tens of billions of real people’s money, you can’t stop to lick wounds. I’ve also got some sympathy for the OMW boys and girls – this will be the biggest replatforming since Methuselah was a boy, and nothing in it is easy.

On the other hand, though, this is £330m down the Swanee. Three. Hundred. And. Thirty. Million. Pounds. Now, the pound isn’t worth what it was, but it’s still more money than you can shake a stick at, plus the stick, as PJ O’Rourke once said.

It feels from here like there will be a reckoning for that in one way or the other. It shouldn’t be possible to get that far into a project like this and have nothing to show for it – even allowing for pensions reform eighty-sixing the project scope.

IFDS has a case to answer in terms of being a strong supplier – but OMW will have one to answer in terms of being a strong client. However it all shakes out, I suspect OMW will be a *very* strong client at FNZ – as politicians would probably say, ‘lessons will be learned’.

In terms of FNZ, we now have a business which powers most of the banks, most of the lifecos and a good number of monoline platforms and large SIPPcos. It is becoming a systemically important business, and one in which – judging by our inboxes today – advisers are taking a strong interest. We’ll take a closer look at them on your behalf soon.

I’ll leave you with a few questions. How does FNZ prioritise a client list which has Aviva, Standard Life, Old Mutual Wealth, Barclays, Santander, HSBC and other big names on it? Every one of those wants to know that it is your favourite client, with the biggest voice at the table. Very hard to walk that line. What genuine differentiation will there be between, say, Aviva’s offering and OMW’s eventual one? How likely is it that a firm would transition assets off one onto the other, given the shared underpinnings? And what does the new timeline for completing replatforming – mid-2019 for existing asset migration – mean for OMW’s conscious uncoupling from the parent group? Is that our timeline now?

Lots to ponder – but a fascinating day in this business we call show.

 

[1] The use of ‘abstruse’ is, in itself, abstruse. This pleases me more than a) it should and b) it does you.

COVERT CONSULTATION COMPLICATIONS

I’ve been reading about Kim Philby lately, the so-called Cambridge Spy who fooled the British Intelligence Service for decades as he passed information to his KGB handlers. Secrecy, covering his tracks and passing communications in a manner that meant they would go undetected by all but the intended recipient were all in a day’s work.

Bringing things slightly more up to date than the Cold War and the FCA has “announced” that it will carry out a platform market review. We’ll get to the inverted commas.

It’s possible that you may have missed the announcement, initially at least. Many of us did. I was one of them. How were we all so lax about what is potentially quite a big deal? Perhaps the fact that it was nestled quietly on page 76 of the FCA’s 2017/18 Business Plan. Right after the bit about assessing disclosure.

So, yes, “announcing” is stretching it a bit. But now we know about it, what do we know?

It stems from the interim findings of the Asset Management Market Study (AMMS). These findings highlighted some areas where competition may not be working for platform investors as well as it could or should be. Charging structures, how well investment tools enable effective choice and whether platforms have the clout and enthusiasm to drive competitive pressure on asset manager charges will all be under the spotlight. In a bare room. With no windows. And no clock. I’ll stop now.

Much like the AMMS, the aim is to understand where competition between platforms isn’t working to benefit consumers and what can be done to address that.

There has been the usual baseline of grumping which greets pretty much anything the FCA proposes. We’re sure they’re used to it and do their crying in the rain. And there are undoubtedly other things that stretched resources could be allocated to. But, we’re talking about making sure that the primary market for consumer investment, which is steadily growing and introducing new offerings, is working in consumers’ interests. That’s a good thing.

Making decisions about investing is important. You could have £1m or £1,000 or £100 to invest. It doesn’t matter. If it’s yours, it’s important and you want to do the best you can with it. But deciding what that looks like can be difficult. There are more options than ever before, more information than ever before but it can be very tricky getting a straight answer to what appears to be a simple question.

The last thing anyone needs on top of all that is an extra layer of concern that, having worked through all the other stuff, you’re still not getting the best arrangement for your money because inefficiently managed market dynamics are impacting effective competition.

Anything that highlights impediments to consumers getting the best possible outcome, in a manner that is easy to navigate and understand, is a good thing in my book.

Suggestions that the consultation paper will only be available via dead drop are yet to be confirmed.

BEHIND THE DATAGASM

Well, that was unexpected.

Our infographic on the retail advised platform market seems to have caught the imagination of lots of you; it’s coming up fast on 10,000 views on LinkedIn (which is a lot for little old us) and is one of the most downloaded things ever from the lang cat website. Mind you, that’s before you had a General Election to concentrate on.

At the same time, our DMs and emails have filled up with folk asking questions about how we got to various conclusions, so that’s the purpose of this blog. The thing about infographics, of course, is that they’re great at presenting information simply, but when the information is in itself not simple, you have to take them for what they are.

So here’s a quick rundown of the answers to the five most asked things:

  1. This particular infographic shows market size figures which are based on the retail advised market only. By that we mean the platforms we cover in our annual advised guide. These are platforms that an IFA or restricted adviser could reasonably sign up to in an open-market due diligence exercise. So we don’t include (for example) the advised Hargreaves Lansdown book, the IPS book for Cofunds, or the Towry / Tilney book for SEI. Lots of these assets are advised, but not in that open market sense.
  2. Our figures are quite a lot lower than some you’ll see because we are rigorous in stripping out institutional monies, D2C monies, double counting and other non-retail advised assets for this particular view. Most platforms don’t readily give these kinds of channel splits, so we often have to do some estimating, but we’re pretty confident in our numbers. We also do numbers which include all that stuff, but not in this infographic. We might do some other ones.
  3. However, the ‘bunce per customer’ figure does include those other channels in some cases (where we can’t reasonably split it out from annual reports and accounts) – Cofunds being a good example.
  4. The projected tech provider split is done on narrow ‘constant market share’ terms – that is to say it only tries to give a sense of this particular market channel shifting as a result of replatformings over the next few years. We are taking no view on winners and losers over that time (though keep reading below for a bit more).
  5. The tech provider landscape is quite a lot wider when you allow other advised channels in – you’d see a lot more SEI and Pershing, for example. You’d start to see JHC Figaro appearing if we brought in some of the D2C stuff – and if we brought Hargreaves’ advised assets in then the ‘proprietary’ wedge would increase dramatically.
WHAT DO WE THINK IS GOING TO HAPPEN?

That 2020 view in the tech provider split is naturally interesting. As you may know, we wrote a couple of years ago that ‘platforms are dead’, and by that we meant that the market as it stood was starting to fragment and would re-form as something different, which might or might not be a beautiful butterfly.

Since then we’ve seen nothing to counteract our view. Pricing in the retail space is converging. The regulator is starting to take a keen interest in competition, and whether platforms are doing enough (or anything) to drive down costs for customers. To my mind the greatest failure of the platform market has been the inability to aggregate customer orders to the extent that they can access institutional share classes rather than 75bp retail classes. That needs to change.

To that end, it’s worth mentioning a couple of trends we think will be significant. The first is one we wrote about in our recent paper called Level Up (you can download that here). As more and more adviser firms realise that they can really start to power through in terms of growth (whether through co-operation, consolidation, acquisition or organically), they’ll be able to remake the platform sector in their own image, and that means not accepting the retail offerings that are out there at the moment.

This will lead to lots more strategic platform partnerships in the Succession / IPS / Tilney mould. We think ‘black box’ style providers such as SEI (who sponsored that report), Pershing and IFDL will be beneficiaries of this, though we’re not going to be drawn on who they’ll cannibalise along the way. If we were betting cats, we’d reckon that between a quarter and a third of the UK advised landscape will be through these kinds of propositions in the next five years. Given that the wider asset view probably brings us up to around £450bn or just shy of that at end 2016, and allowing for a reasonable organic growth in assets, that suggests we could be up to £150bn or £200bn in those kinds of propositions by 2022.

At the same time, we think you’ll see a resurgence of monies flowing into DFMs’ own custody – DFM models on platform being one of the stranger developments of the last few years – and also into the direct custody of those multi-asset providers who are up for it. Chief among those, of course, will be Vanguard.

All of this means that the wider advised space – beyond the pure retail element we captured in the infographic – is going to be a fascinating place for some time to come. We’re working on how to reflect that in our next advised platform guide, which will bring the wider set in and which will be available in September or October this year, depending on whether I let everyone have summer holidays or not.

And that’s it for now. Enjoy the politics and that.

SLAB: Standard Life and Aberdeen get it on

I don’t know how your weekend was, but I suspect it was more fun than the lawyers, bean counters and PR people at Aberdeen and Standard Life had. Out of the blue, the news was broken by @MarkKleinmanSky around lunchtime Saturday, and from there things have moved rapidly to the point of the merger recommendation being issued first thing today (Monday 6th March)

As always with these things our first thought is for the people involved. We know and work with some hugely impressive people at Aberdeen, Parmenion, Standard Life, SLI, Elevate and so on, and it can’t have been pleasant for them to be watching Sky News over the weekend.

The merger recommendation carries an expectation of “approximately £200m per annum of cost synergies”. As one M&A expert comments in today’s FT, “this feels like an attempt to smash the companies together and take costs out”. For sure the savings won’t be found from travel expenses.

We wish all the 9000 employees well, but especially our Edinburgh friends.

It’s a tough time. Everywhere you look there are significant headwinds. Digitisation, the rise of passives, longevity, regulatory pressure, consumer awareness of costs, pension reforms – the list goes on. 18 months ago we wrote how “Platforms are dead”, and this move is a case in point. Standard Life Wrap’s SLI holdings account for maybe 3% of total SLI assets, and Parmenion will be an even smaller number at Aberdeen. Platforms are utterly irrelevant in this deal; it’s bigger global mandate deals that are driving the change.

A quick glance across the pond at the sales figures for mutual funds in the states makes for interesting/alarming reading, depending on your point of view. Right now, 75 cents of every new dollar invested in the U.S. goes into Vanguard or Blackrock’s index-based products and collectively they own 12 percent of the stock market. Vanguard took £305bn in 2016, destroying the record flow for any asset manager by over £50bn. It wrote £47bn in January 2017, double last year’s pace. If this continues it will write over £500bn in 2017. And meanwhile, in 2016, US active mutual funds shed over £300bn.

Whether this happens over here remains to be seen, but Vanguard and passive investing generally does seem to be gaining momentum. The Investment Association reported last week that tracker funds now represent 13.6% of industry FUM, compared with 11.4% a year ago. Estimates for platform flows and AUA vary, yet Vanguard appears high on pretty much every platform’s best-selling funds list – and it hasn’t seriously entered the UK D2C distribution market. Yet.

Against this backdrop it’s easy to look at the proposed SL/AB merger (SLAB?) and wonder whether it’s a defensive move, especially since neither party has any passive capabilities in-house. 69% of SL’s business is UK based, and whilst Aberdeen has a broader market spread it still relies on the UK for 58%. The combined organization might be eyeing the global stage, but the UK will still pay the bills, and here, at least in the short term, the lack of passive capabilities might not represent a problem.

Standard Life’s Myfolio products, for example, already buy in passives from Vanguard, Blackrock etc. The margins for SL as product manufacturer are still there, especially with its established distribution, and in pure percentage terms those margins may be higher than the ultra-low manufacturing margins passives generate. Competing with the major passive providers would be folly. Complementing them is less so.

SL and Aberdeen both have eyes on the USA – SLI was quite open at the time of taking up its Ryder Cup sponsorship that this was a big priority. Over there, a combined £700bn or $860bn still isn’t enough to get you in the top 5 – but it’s not that far off.

One thing that feels true (and so must be true in this post-truth age) is that this is the tip of the iceberg. Whatever the driving factor behind this merger, it’s hard to believe these circumstances are unique to Aberdeen and Standard Life. As disruptive as this will be for their staff, first mover advantage in the race for scale could be extremely valuable.

“It’ll cost you five hundred grand to see me” – Ascentric goes all in

Extra lang cat points if you can identify the source of the quote in the title.

OK, so just a quick blogette on Ascentric’s price change which hit the press today. Before I get going, I should disclose that we work with Ascentric on some PR stuff, so I’m conflicted and all that. If you don’t want to read basic arithmetic jottings as a result because you think it will be FAKE NEWS, then please click here.

I used to give the nice folks at Ascentric a hard time for the complexity of their charging structure; in fact back in the early days of the lang cat I gave them a ‘complexification’ award because their charges were the hardest to sort out of just about anyone.

A wee while ago it launched an all-in charging structure which was better, but left a few boxes unticked. The wheel has now come full circle and we have a full, proper all-in structure.

The headline charge is 0.3%, which is sharp enough to show reasonably well without getting in and among the price leaders for larger portfolios (this is all subject to some stuff about trading, which I’ll cover in a moment). There’s a minimum charge of £180pa which only hits you below £60k, so well below what most advisers are placing on platforms. The 0.3% is flat up to £1m and then tiers away.

What’s unusual about this is that it’s not just flat across wrappers – which is unusual enough – but also across asset types. The only other people to do this are 7IM and Alliance Trust Savings in its IFO structure. Both of those, however, have differential charges for SIPP (in 7IM’s case this is because it doesn’t have its own SIPP yet). That leaves Ascentric as the only genuinely all-in provider in the market.

Is that a claim to fame worth having? Is it a deal, a steal, the sale of the f***in’ century? If we look backward, maybe not. I don’t know what proportion of IFA-controlled assets are in exchange traded securities which normally attract trading charges, but it’s not high. But if we posit that trading charges have been an inhibitor of ETF, investment trust and other ETP usage, then this is welcome.

Let’s do some heatmaps, because what else are we here for?

ISA first – no trading charges included.

So that’s a decent showing – not as cheap as the fixed fees lot but certainly not far off the market at or around the £100k – £150k mark.

SIPP next – again, with no trading fees:

A bit sharper here, reflecting the fact that lots of providers still up their charges a little for SIPP because of the emotional trauma of collecting tax relief or something.

And finally, let’s look at an MPS scenario with quarterly rebalancing of a 20-asset portfolio:

This is stronger again – Ascentric works very nicely here in the £100k to £500k space. This is all down to multi-wrapper and multi-asset agnosticism, if you know what I mean, which you probably don’t, but that’s OK. We’re together, and that’s what counts.

All these scenarios miss out the biggest strength of this new price strategy – no trading charges on ITs, ETFs and so on. If we did some scenarios which included a bunch of ETFs in a model, for example, Ascentric would do very much better.

So, house loyalty aside, I like this new shape from our Bathian friends. It’s not all great – I’d like to see a cap for bigger funds (there’s a collar for smaller ones and fair’s fair), and I’m not sure I like seeing cash included as a chargeable asset. Although it’s worth pointing out that Ascentric won’t skim cash any more, so if rates do head north it’s likely clients will be better off.

But my main thing is that Ascentric, 7IM and ATS are all getting into what I always thought wrap platforms were meant to be – genuinely open environments which were tax wrapper and asset type neutral. I’m really heartened to see this.

Financial planning and implementation can happen without any concerns about cost arbitrage between asset types in these kinds of structures, and how much more platform could that be?

The answer is none. None more platform.

 

PLATFORMS THROUGH THE LOOKING GLASS

If it was a human, the platform sector would be studying for its A levels (or Highers, if it lived in Scotland). It would have started drinking about two years ago, wouldn’t be able to get a Glastonbury ticket for love nor money and would be seriously confused at the concept of a telephone that’s fixed to a wall and doesn’t take pictures.

Yes, it’s now 17 years since what we now recognise as the advised platform sector was born. In that time, some have come and gone. For much of this period, there was a steady stream of new entrants, peaking in the mid OO’s and tapering away by 2011, and of late, the first flurry of sector cannibalisation.

There’s been some bad practices: behind-the-scenes rebate pocketing; interest scarfing (which mattered when interest was higher); pain inflicted on advisers by technology changes and variable service quality, among others.

ORIGIN HAS INFLUENCED PROPOSITIONS

The sector has come to be made up of propositions with a range of origins. Some are product lines of the life company arm of multi-nationals. Some were entrepreneurial start-ups. Some were disrupter brands. Some grew from SIPPs. Others started life as DFM services. And that’s still only some.

This is one of the reasons that it’s so complex and hard to make sense of; the general pattern is that a platform’s origin has a significant bearing on the type of proposition it becomes (although, just to make things even easier, that is not exclusively the case). You have independent wraps that have always had agnostic, whole of market fund ranges and stayed clear of the whole planning tool thing. You have lifecos that very much do the planning tool thing and act as a conduit to the sister company’s fund range (allegedly). A cohort that are particularly good at stockbroking and meeting more sophisticated investment needs. Some that only really do collectives. Some that are basic. Some that are cheap. Some that are expensive. Some that have a big focus on client facing tech. You get the drift.

It means advisers really do have a job on their hands working out which one, or ones, of 25+ can meet the needs of their client proposition(s). The regulator expects whole of market assessment and records to be kept. That’s why due diligence has become such a big thing. It’s an industry in itself for advisers and providers alike.

But, I don’t see how accusations of keeping things hidden can be levelled at platforms. Yes, some are clearer about their target market than others. And in some cases, there can be an annoying tendency to try and be all things to all people – that sort of thing ultimately helps no one. However, when asking questions about proposition, the lang cat has always found that platforms are the most transparent of the markets we assess.

SHAMELESS PLUG ALERT

As an example, we recently launched our very own platform directory and found all of the platforms to be very happy to answer everything we asked (and we only publish a portion of the data) and there’s a further four platforms in the pipeline. Whether it be for adviser due diligence, our own publications or specific research projects, we find that if you are prepared to do the hard yards of primary research, the platforms tend to be open.

Business performance is, as you might expect, less transparent than proposition. But even in this area, reporting of AUA and new business data has been in place for many years, and much of this is passed on to fund groups and advisers by consultancies.

Profit/(loss) measurements are notoriously tricky to truly get to the bottom of, mainly for the platforms nestled among complex business structures, and there are a few who successfully obfuscate. But only a few. And in the long run, I don’t think it does them any good.

TRANSPARENCY WORKS IN PLATFORMS’ FAVOUR

But overall, we generally view platforms as a very transparent corner of the financial sector. Tell me another part of the relatable market where it’s as easy to openly access and compare provider information, especially at no cost?

But it’s not all good. We think it’s much harder for people to get hold of the same level of detail on SIPPs, or personal pensions, or corporate pensions, DFM’s and back office providers. Yet transparency clearly benefits platforms; the easier it is to research a product, the more likely you are to use it. We’d certainly like to see – and are going to try to bring – a similar level of transparency to other areas.

MAKING THE COMPLEX SIMPLE IS WHAT’S HARD

Don’t get me wrong, there’s always more to do. And because they are hoovering up everyone’s assets, platforms do have a responsibility to be ever more transparent.

The issue therefore is not that platforms keep things hidden, it’s that they are complex beasts. No two are the same, they sometimes have different names for the same things, sometimes the lily is gilded and they continue to rapidly develop in all different directions. So, the challenge for the sector collectively; advisers trying to assess them, organisations trying to help advisers assess them and providers themselves, is to keep getting better at making the complex simple enough so that users can make the right decisions.

You can say what you want about platforms. We certainly do. But an establishment-level lack of willingness to share information is not one that I recognise.