The lang cat’s Platform Market Scorecard was released to subscribers last week. You can read more about it here, but we want to take you through a couple of findings from this quarter’s smorgasbord.
In each quarter, we take a detailed look at one area of platform propositions. This quarter, because it’s so topical, we’re diving headlong into ISA functionality. Be warned, things are not looking so great.
In our cohort of 19 platforms, representing £478bn of AUA, among other things we found a 32.6% year on year uptick in ISA net flows. So, on the surface of it, you would think that the slew of recent ISA legislation has had the desired effect and everyone’s JISAs, LISAs and IFISAs were filling up like certain lang cats do at the free buffet.
But the lang cat spends hours pouring over the detail of platform propositions BECAUSE IT’S FUN, and so we knew in advance that there were plenty of gaps in folks’ product sets.
- Only 1 supports LISA
- Only 8 support flexi-ISA contributions
- Only 6 support JISA
- On the plus side, 18 accommodate inherited ISA
Let’s tackle the elephant in the room and talk about LISA. Poor LISA isn’t a popular girl; only Transact has turned up to her party. Every other platform tells us that it is either in the progress of developing, or considering developing, or considering considering developing a LISA. Those in the ‘considering’ camp say they are monitoring market demand. In our view, there are two main barriers at play.
- To operate a LISA, there must be the facility to deduct adviser charges from outside the ISA.
This is because adviser charge deductions count as a withdrawal and so may trigger the early withdrawal penalty (although this isn’t straightforward). As only 5 platforms currently allow ISA charges to be deducted from outside the wrapper, the vast majority of the market lacks one of the basic building blocks required to develop a LISA.
- The age demographic of advised platform clients.
Our data show the average age of an advised platform client to be 58. LISA therefore can’t play to the core adviser platform audience – and so there’s a lack of incentive to prioritise developing the product. We get this, but enabling tax-efficient saving is a core platform function and as such we think all platforms should fully support it. This is especially important for such a core, entry point wrapper as ISAs – one that most clients should and do use. So platforms, we feel your pain, but it’s time to get your LISA on.
WHY ARE SUCH BASIC THINGS MISSING?
The pain that platforms are experiencing in terms of constrained development resource doesn’t end there. You can find all the detail inside the scorecard, but every platform tells us that the tidal wave of mandatory regulatory change is swamping innovation. Whether we’d get any innovation if there was no regulatory change is a moot point, but we can safely take it to mean ‘the things they want to be working on’. This applies to what you might call ‘big’ developments, such as full technology upgrades, 21st century standard mobile kit for clients, more responsive and adaptive front ends and adding new wrapper/fund products. So what we’re seeing in the case of ISA functionality is, somewhat ironically, legislation preventing … development that pertains to legislation.
TIME FOR A PUNT
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