The UK adviser platform market is at inflection point in terms of the underlying systems it uses, Barry Neilson, chief commercial officer, Novia Financial tells Rob Kingsbury.
The dominance of the large system providers will gradually be lost to nimbler, process-focussed, micro-services, which can react faster to market needs and help platforms deliver more useful services to advice firms, Novia believes. It is where the platform is turning its attention as it positions for the next five years.
“The platform market is struggling to respond to market needs,” Neilson said. “Talk to 100 financial advisers and nearly all will tell you they are discontented with their current platform.” This, he argued, is because there has been a lack of innovation in the platform market in the last five years, as platforms have become too reliant on monolithic structures, which has restricted the advice business model. “The cost and the time to implement change is too high for the monolithic systems to enable the kind of innovation the market now needs,” Neilson said.
As the platform market experiences pricing pressures, driven by market forces and Consumer Duty, this inability to innovate and to deliver up-to-date services, will become even more obvious, he added.
In comparison to the one-size-fits all systems, utilising micro-services – focused pieces of software built to do one thing and do it well – is the way the successful players in the market will move forward, he argued.
Micro-services enable platforms to be more responsive to the market. They can open up how platforms can operate and what they can offer, he said. “We can develop new, smaller services, which meet specific adviser needs, and can customise what we offer. For example, a platform could develop a number of different service options, with the advice firm selecting the ones that best suit their business model.”
Neilson believes platforms will now either have to start to deconstruct and use micro-services or get their current system provider to start innovating. “But larger system providers are unlikely to want to innovate in this way due to the cost involved in changing their system,” he argued.” Whereas working with a micro-services provider, it is possible to make changes and innovations more easily and cost effectively.”
In addition, Novia expects platform fees to come down over the next three to five years, Neilson said. “So cost is going to be a big differentiator for successful platforms. Using micro-services, we can manage down our costs and so our price.”
He flagged testing as one area of cost saving. “With large systems every change has to be aggressively tested throughout the entire system for any impact on the whole structure. With a micro-service, you are primarily testing that piece of software and any change can be more quickly retested and implemented.”
“We see the use of micro-services as the next big leap for platforms,” Neilson said. “It will be those platforms that can evolve their service quickly and innovate to offer more to the advice firms, who will be the winners over the next 3-5 years.”
Novia is currently deconstructing to a hybrid model, using its current provider, GBST’s Composer system, and bringing in micro-services from Finocomp to deliver specific pieces of functionality. The platform currently has 13 of Finocomp’s micro-services either in operation or in development for the platform.
Novia recently cut its platform charges, starting from 1 January 2023. The reduction will see the headline rates paid by a typical Novia client, with between £100k-£200k on the platform, reduced from 0.50% to 0.30% and 0.35% respectively for firms with over and under £10m of assets on the platform.
Under the new terms, a customer with a £150,000 portfolio would have paid an annual platform charge of £750 and will now pay £450 where the adviser firm holds more than £10m of AUA on the Novia platform (£525 for those firms holding up to £10m of AUA).
The minimum fee is to be increased from £75 to £100 from 1 January 2023 and will only apply to clients with small portfolios paying less than £8.33 per month.
