The number of advice firms planning to launch their own platform has flatlined, NextWealth’s latest report shows.
The report, The Next Platform Shakeout: A spectrum of choice and complexity in the platform market, found that while a quarter (24%) of firms with £250 million in assets under administration have a platform, the market size including those with a platform and with plans to launch one, has not grown in the past two years.
Heather Hopkins, managing director of NextWealth, said: “The rise of large financial advice firms and the woeful state of integrations has put pressure on the third-party platforms. New, tech-first entrants have increased competitive pressure on platforms, increasing choice and squeezing on price. In this year’s report, we found a growing number of third-party-platforms experimenting with models to support these large firms, offering both for revenue sharing and customisation.”
But while the share of firms planning to launch a platform has slowed, the trend continues as firms seek more control in-house, says NextWealth, driven by a combination of customer experience, investment functionality and reducing operational risk.
Hopkins said the report found a clear distinction among third party platform providers between those fighting the trend and those that recognise it as a fact and are not responding.
“In last year’s report, we found third-party platforms were more complacent. Interviewees for the most part felt that the trend would fizzle out as firms came to recognise the volume of work that platforms do for very low margin,” said Hopkins. “Since then, some have recognised that large firms that control significant asset pools will look to take on some of the role the platform currently performs and in return, they expect to retain a portion of the platform fee.”
Hopkins said that for advice firms looking for the “holy grail”, in most cases white-label platforms don’t solve the problems caused by a multi-platform strategy.
She added: “Asset transfers are doggedly difficult as is changing behaviour. Several advice firms have managed to launch and embed a platform but many have struggled. The test will be to see how more nimble, tech-first propositions grow and scale. One thing is certain though, they are challenging the entire industry.”
Main image: jr-korpa-mwYTmjpcxIc-unsplas
