Written by Mark Cotter on Tuesday 17 May 2016
With news that Standard Life has acquired Axa Elevate I suspect that another batch of already overworked advisers gave out a weary sigh! Not more due diligence on our chosen platforms I hear them cry!
These kind of developments in the industry do raise an interesting question though in terms of which ‘parts’ of the Platform chain are you evaluating? Is it the parent company, the platform or the underlying technology provider (very rarely are all 3 one and the same). As we dig deeper it can start to feel like a Russian doll and like a Russian doll, with each layer down the detail is often that much harder to see.
For example, if a platform changes ownership, is a full review required? Most advisers would say yes I expect. What about changes to the underlying technology provider? Maybe? Or third party tools provider? Probably no? What about other more subtle relationships between a platform and the multitude of other firms it will contract with as part of the proposition? Should advisers be expected to keep tabs on all of this and on all of the platforms they use and/or have on a watch-list.
All this seems even more problematic when we consider the general move towards takeovers and consolidation as a result of shrinking margins. The number of possible platforms for advisers has doubled in the last 5-10 years whereas the number of technology providers has actually shrunk (consolidation apparently happening beneath the surface rather than upon it) making the landscape even more tricky to navigate.
None of this of course has been made any easier by the regulator, with the FCA’s principle (rather than rule) based guidance on the subject not aiding clarity for advisers. For example the FCA will give no advice as to how many platforms an adviser should use (just that one is unlikely to be suitable for all of your clients) and no guidance even as to how often platform due diligence should even be done! We know that platform due diligence is important and we know it is required but advisers are left to work out what that means in practice for themselves.
Now setting aside the practical problems for a second and assuming that an advisory firm even had the time and all the information, is this in-depth ‘belts and braces’ approach even sensible or efficient to do in the first place? After all if you dig deep enough as mentioned above you will most probably find the same few bits of underlying technology anyway! If you review the underlying technology of your platform provider you are probably reviewing the same technology for a few other platforms that you don’t use. Which could potentially prove tricky to reconcile if you place a heavy weight on the underlying technology as a factor, but only select one of several platforms that use it.
The actual relationships between these parties (e.g. Platform to Tech provider) is also just as important, and equally tricky to assess. Should advisers know details such as structure and duration of the contract, service level agreements, support, termination clauses, where the various responsibilities lie, agreed regulatory (and other) driven changes, the financial and manpower committed to development etc. etc. Should advisers be asking their platform of choice to be privy to these detailed questions? Can platforms even give these answers if some of the information is sensitive/confidential between them and the technology provider?
I do not of course have an answer to all of this (questions are more interesting anyway!) but perhaps in light of the above it is better to some extent to ignore the technology and concentrate on broader proposition, functionality, service levels, commitment and profitability. But is this sufficient from an FCA due diligence point of view? How many dolls we have to look inside remains an open question for now.
As first published in Money Marketing 17th May 2016
The RegTech Paradox
13 February 2018 by Kevin Okell (Director)
Location, Location, Location: VAT digital services
9 February 2018 by Kevin Okell (Director)
Why hasn’t my gadget claim been settled in 3 seconds?
31 January 2018 by Sumit Sethi (Consultant)