Platform decisions made several years ago may no longer be as robust as they were at the time, and with increased FCA scrutiny on suitability, advisers are now reassessing those historic decisions.
Pension freedoms reforms have led to a range of new solutions designed to provide consumers with access to their retirement savings while preserving the potential for capital growth. With focus often on flexible drawdown and cash management, wealth platforms have been undoubted beneficiaries; those that don’t address these needs are no longer fit for purpose.
Next up is the lifetime ISA – an increasingly complex proposition where the cost of implementation and support could be on a par with pension freedoms. Meanwhile, with regulatory focus moving to ensure that clients get their money back should things go wrong, our work shows huge variation in reconciliation costs, with many platforms still supporting manual fixes and work-arounds – an area to be probed strongly during platform due diligence.
Since the birth of platforms we have witnessed the launch of Facebook, YouTube, the iPhone and, more recently, the rise of Uber and Airbnb. Closer to home, we have electronic signatures, portfolio transfer open standards, faster payments and the adoption of cloud computing.
This relentless cycle of technology upgrade requires considerable effort and investment. Core platform administration technology will increasingly become a utility to be shared, while hard-fought development budget will be spent on differentiating the ‘front end’ to have most impact on advisers and clients.
Successfully executing the vision is tough. Many platforms are still busy attempting to deliver the original straight through processing vision, while deep two-way integration with adviser client management (back-office) systems (rather than inefficient re-keying) remains, for many, elusive.
Positively, the average time to move a portfolio between platforms has fallen dramatically from weeks to days (or hours) since the introduction of open electronic standards and service level agreements (though some providers still struggle to implement these changes).
Although the average basis points fee received by an adviser platform has almost halved this decade, we believe advisers want to use a platform which has a sustainable business model (not lowest charges), is committed to the adviser channel and has a vision to be here for the long term.
Advisers also have to ask questions about a platform’s capability to manage and deliver change, too. New regulatory requirements and new software introduce new levels of complexity: more potential points of failure, release cycles, requirements, suppliers, customer data and governance.
Does the platform have a dedicated change function, a documented change process? How does your provider manage releases where platforms are made up of multiple components on different machines, in different data centres, and sometimes, even in different countries? How do platforms insulate their clients from the failure of any one of these, and how robust is their disaster recovery?
Undoubtedly not as ‘sexy’ as new functionality, those organisations adept at complex change management will be well positioned when advisers assess the full, all-round capabilities and functionality of potential platform partners, including their ability to migrate data and keep the existing business going without interruption.
We expect the ability to evidence this, alongside continued investment in the proposition, demonstrable thought-leadership and a flexible and configurable system, will be critical when adviser firms reassess the platforms they choose to partner with.
Having been involved in many change programmes, we do not underestimate the challenges of this, but just because something is hard doesn’t mean it shouldn't be done.
Article first published in Zurich Advice Matters, January 2017