Macquarie’s decision this week to close its UK platform could hardly have been timed better, or worse. Previously serene platform hacks were sent into a gibbering caffeine-fuelled overdrive as they tried to cover CP10/29 and this big news from the Australian giant at the same time.
The lang cat is under no such pressure, so let’s have a more measured consider of the potential implications of Macquarie’s news.
First, this is sour news for the good people working on the Macquarie business. Macquarie have some heavyweights in the team and advisers I know who have used them have always been very complimentary about the calibre of staff. Good people will always find a new berth, but in an uncertain time and in the run-up to Christmas this is hard for them and their families.
Secondly, it’s tough for the IFAs that had selected Macquarie. Macquarie’s roadmap looked really good, and the IFAs who bought in didn’t do so on the spur of the moment. As one IFA has already reported in IFAOnline there are real, practical implications for clients who may already have swallowed one platform-to-platform move and now have to do it again. This will be a significant strain on some IFA businesses.
All that said, I have a sneaking admiration for the Macquarie decision. They have a reputation for being a tough bunch, and if something isn’t meeting their hurdle rates they knock, it on the head early. That seems to be what’s happened here. Distribution scale is hard to reach in the UK; the FUA is concentrated in relatively few firms, back office usage is inconsistent and fragmented and the tax landscape is brutally complex. Put all that together and it is a tough ask for any company that doesn’t already have scale in the UK.
So I think this tale should serve as a reality check for any future entrants from Yurp and the US, don’t just concentrate on how good your functionality is, spend your time really working on how big you can get your footprint in the places where the FUA lives. It’s not going to be easy.
At the FT Retirement Summit recently, I said that I thought 2011 would see one exit and one quiet wind-down from the platform market. I was wrong? one of them happened in 2010. But I also stand by my comment that it’s right and necessary that firms should fail. This is the market doing what it does, without fear, favour or emotion. It leaves the others stronger. We need rational, hard decision-making of the kind Macquarie has shown here in this market and they are to be commended for it.
One final thing. There has been some unedifying crowing from at least one other provider, and an unexpected one at that Ã¢?? about the announcement. Twitter updates from the corporate account saying ‘ooops!’ and, at least we’re profitable! are stupid, disrespectful to those affected and beneath you. As I’ve said in other posts, we’re trying to build a better industry here. If you can’t say anything constructive, don’t say anything at all.