There is no doubt that modern adviser businesses will need to be 100 per cent platform based, and the pensions freedoms are focusing minds still further on this transition.
As with selecting investments, it is the future performance of platforms that is of real interest. So what does 2015 tell us about how this future could shape up?
In the short term, the impact of pensions freedoms has been relatively small. Most platforms have not had to adapt too much to meet the basic requirements and, with the exception of a handful of clients wishing to cash in their pension pots, most advisers have carried on business as normal.
Perhaps the most significant impact is on declared platform flows. A number of providers have failed to upgrade legacy products to accommodate full flexibility, instead demanding a customer transfers internally to their platform. This is not business won in the open market, giving a false sense of momentum to otherwise struggling platforms.
RDR and the sunset clause continue to make waves. The big fund supermarket platforms are experiencing considerable outflows, with more than £6.5bn of assets moving elsewhere each quarter.
The significance of this migration of assets should not be underestimated. The redistribution of these assets is propping up other platforms, but these easy assets will not be there forever.
Platforms still to unbundle will hopefully complete this work in time for the April 2016 deadline, and it is expected their outflows will slow.
In the meantime, advisers should progress their own unbundling activities as soon as possible – there is the potential for a bottleneck in late 2015 and early 2016 as platforms try to push conversions through a limited group of transfer agents ahead of the deadline.
Understanding the real business performance underpinning a platform is vital. Investors should not be beguiled by high gross sales or percentage growth rates. What really matters – and what the platform gets paid on – are the net sales figures in cash terms.
Persistency paints an unbiased view of what users think of the overall platform proposition. Business can be won through aggressive sales, marketing or pricing, but it will only stick if the platform is delivering across the board.
The industry should start to see real differentiation between platform offers and target markets. Pensions freedoms will fundamentally alter the shape of adviser books, with drawdown advice being provided to roughly 5 per cent of clients in 2014, to perhaps as high as 80 per cent by 2024. This in turn will influence adviser platform selection.
The optimum client outcome in retirement demands the sophisticated management of multiple goals, investment strategies and wrappers with suitable withdrawal strategies.
A true adviser platform is one that can support advisers in resolving the choice, complexity and uncertainty clients now face.
Simpler platforms will struggle to manage this complexity and face a number of choices, one of which is not to bother playing in the adviser market at all. Providing the levels of sophistication advisers will demand is difficult and expensive.
