Written by Kevin Okell on Wednesday 20 November 2013
Last year we reported that total reported revenue for the top 20 advisory platforms was less than their combined expenses and suggested that the industry needed to tackle operational efficiency as a matter of urgency. 12 months on with another full set of accounts filed, I am pleased to report that things appear to have improved.
Whilst revenues grew a little slower than we’d predicted, expenditure actually fell slightly resulting in a small profit for the platform sector for the first time. Whilst some of this improvement may be down to changes in accounting practice, it does seem like the industry is heading in the right direction with over half of all platforms now reporting a profit.
There is still no room for complacency however. Whilst platform AUA grew by over 20% in 2012, revenue increased by less than 6%, clearly demonstrating the continued pressure on margins. The accounts we analysed relate predominantly to 2012 during which the average yield on platform assets under administration fell below 40bps – another less welcome first for the platform industry. Like all good averages this one hides a multitude of nuances (including a range that spans 15bps to 90bps) but the direction of pricing seems clear and the figure has undoubtedly fallen further in 2013.
That means costs must continue to come down and it will be interesting to see if the industry has managed to sustain the 2012 improvement when this year’s accounts get filed over the next 12 months.