Paraplanners are expecting further consolidation in the platform market, following the announcement by M&G in September that it is exiting the market as part of its simplification plans.
According to Professional Paraplanner Parameters Survey, 60% of paraplanners expect further consolidation among providers, more than four times the 14% who disagreed. A quarter (26%) of those surveyed said they are unsure.
The majority of paraplanners said there are still too many platforms in existence and warned that smaller platforms will struggle to survive.
“There are too many players, many of whom are not very good at what they do and have woeful technology. The market needs to be tidied up,” said one respondent.
Another told Professional Paraplanner: “It will be difficult for small platforms to compete in terms of charges due to scale and those without scale will fail. Margins are now far lower as charges have dropped.”
| Do you expect further consolidation among platforms? | |
| Yes | 60% |
| No | 14% |
| Unsure | 26% |
But while the vast majority are expecting smaller providers to be forced out of the market, paraplanners were divided over whether this development would be beneficial for the industry. Just under one in three (29%) believe consolidation will be positive, while the same number (29%) disagreed. A larger percentage (41%) said they were unsure.
One respondent commented: “They all offer the same underlying products, a computer platform on which to aggregate investments. We don’t need multiple players in the market as it is hard for any to have a unique selling point.”
The sentiment was shared by a fellow paraplanner who said there are too many platforms “all doing the same things as each other” and with similar pricing points.
“Consolidation means potentially better terms being offered, more money being put into updating technology, and more opportunities for individual platform USP,” they added.
Others said the effect of consolidation would depend on whether larger players are seeking to drive improvement within the industry or whether they are focused on bolstering their own finances. Many agreed that consolidation would only be a positive trend if clients are put at the forefront of business decisions and service levels are good during the consolidation period.
“Hopefully it will cause platforms to look closely at themselves and that they are providing a good service at an acceptable cost,” said one respondent.
Another said it could be a positive development “as long as there remains platforms to meet different needs and markets and there is sufficient competition.”
| Do you think further platform consolidation will be positive for the industry? | |
| Yes | 29% |
| No | 29% |
| Unsure | 41% |
However, a significant number of paraplanners believe that consolidation will lead to a lack of competition which could have a negative impact on the market and clients in the long-term.
One paraplanner told Professional Paraplanner: “I would like to believe that this will increase competitiveness in order for platforms to strive for the best service level, best access to funds, cheapest fees and so forth which can only be a good thing for customer outcomes, however, with consolidation and less platforms this could potentially have the opposite effect.”
Another commented: “I would want there to be healthy competition between platform providers so they do not get complacent. I would want them to be always striving to provide the best service to customers and that comes partly from good competition in the market.”
One paraplanner told Professional Paraplanner they are not hopeful about the platform market.
“You have a combination of a race to the bottom on price and huge spend on added services that detract from the overall service of the platform,” they noted.
The findings of the survey also showed that paraplanners are concerned that the loss of smaller providers in the market could stem innovation, with smaller firms often more agile than larger players.
Separately, the survey asked paraplanners how often they conduct due diligence on platforms. The most common answer was annually, with 76% of paraplanners citing this response. Just over one in 10 (12%) said they carry out due diligence on an ad-hoc basis, while 11% said they do so every 2-3 years. Only 1% of respondents said they wait between 3-5 years.
| How often do you conduct due diligence on platforms? | |
| Annually | 76% |
| Every 2-3 years | 11% |
| Every 3-5 years | 1% |
| On an ad hoc basis | 12% |
Main image: pat-whelen-Rxt252RzQlY-unsplash
