Now, before the yellow and blue dudes reading this start reaching for the batphone to the legal heavies, I should mention that I’ve worked on the Aviva workplace savings programme on lots of back-room bits and bobs. As a result I’m a) conflicted and b) under NDA so you won’t be getting the skinny on their programme here.
But I do think we can talk, well, I can talk, it’s my website, that’s how it works, a little about providers in the general sense and the economics of platform development. I’m hoping this won’t be as dull as it sounds. Let’s find out.
We’ve all heard of the eye-watering sums, approaching Â£200m in some cases, that some providers have shelled out on their platforms over the last 5 or 6 years. One recently-launched platform is rumoured to have cost Â£90m just to bring to market.
Not everyone can get Â£15-Â£20bn onto their platform (which is roughly the AUA you’d need to make a dent in these kind of development sums). And there are alternative routes to spending that kind of money, some of the monoline/specialist providers have probably spent 1/10th of that. Nonetheless, there are a lot of (usually lifeco) boards staring at a lot of red figures that are going to stay red for a very long time.
Does this matter? Well, we’ve now seen a couple of brave (I think) providers say enough is enough. Macquarie springs to mind. There’s no money to be made, and no end in sight of the required spend. Time to go. That was clear decision making, and although it had hard consequences for lots of good people, it was probably the right thing.
In the corporate space it’s even harder. Right now I don’t know of many (any?) workplace savings platforms who are either achieving significant cross-sales onto corporate ISAs or who are able to charge a sustainable premium for additional investment functionality. Indeed, one of the most interesting propositions out there, Aegon’s workplace ARC platform, makes a virtue of hiding away investment functionality which is too much for parts of the workforce. HL gets good results in terms of getting people engaged with their investments, as does Fidelity. But the group pensions market doesn’t really look all that different (commission aside) to how it did 3 or 4 years ago.
The issue with corporate platforms was always that if they just became the latest add-on to GPPs, a sort of super-charged, mine’s bigger than yours’ functionality boast to try and compete with NEST and the low-cost guys like NOW and B&CE, then they would struggle. I’m not sure I see much evidence so far that the industry is doing a great job in avoiding this.
The EBCs drive innovation in this market, and there’s no doubt that there is some appetite there. But, having talked to many of them, I think there is more than one way to skin that particular cat and a best-of-breed approach from multiple providers with some clever middleware (think Lorica’s Cube, think BenPal, think Benefex) can do the job.
No-one knows the answers to this yet. But when we get big news such as this week’s happenings in York, it’s probably time to look again at this market and whether it’s really functioning in the way it should. Whatever the answer is, it can’t be hundreds of millions of pounds, years of development and no outcomes better than you got with a standard GPP.
My final thought is this. Whether on retail or corporate, never confuse a provider’s spend to date with their willingness or ability to continue that spend. The two are not correlated; you have to judge both when deciding who to partner.
In platforms there is no such thing as Macbeth’s, I am in blood stepped so far that should I wade no more / Returning were as tedious as go o er, And don’t trust anyone who says there is.