The subject of “re-platforming” (that is, platforms changing technology providers) is becoming a hot topic among advisers.
I am finding more and more advisers asking me if Novia has any plans to embark on such an apparently expensive and challenging exercise.
The interest has undoubtedly been driven by the numerous headlines in the media in recent months, horrific costs involved and even exits from the platform market.
The only reason one would consider re-platforming is because the current system either constrains the client proposition and has fallen behind the competition or you cannot take advantage of efficiency savings driven by improved technology.
This is very important given the competitive nature of our market. Of course the irony of this is that the huge spends involved tend to make this a zero-sum game at best.
Whenever I get asked about due diligence my starting point is always the same and that is to focus on what the adviser’s client proposition (contract once the client starts paying a fee) is and then choose the platform that best enables delivery of it.
For example, if the client proposition is to outsource investment decisions to a DFM it’s vital that the platform provides access to the widest possible range of investment instruments so that the money manager can deploy his best ideas.
With one frequently used DFM we see as much as a 30 per cent difference of selected investments across platforms due to the narrow range provided.
I’m not sure clients would be so happy paying for the DFM’s second best thinking? Similarly, does the administrator aggregate trades and offer fractional trading on the increasingly commonly used ETF instruments?
If it does not, any advantages derived through cost savings will be lost in excessive trading fees and the model will not be suitable for regular investment or regular withdrawal.
There are obviously other aspects to consider in the client centric assessment but looking at the problem from a more strategic angle, one big question that is being increasingly asked is, will the platform still be around if I move my clients over to it?
One obvious point is on the topic of financial strength, and for that the best solution is to look for the ratings provided by a ratings agency.
These provide a more in-depth view of the financial health of the platform, having pored over accounts and quizzed management on strategy and the direction the business is heading in.
But the other point advisers should think carefully about is to assess what plans the platform has to replace its technology, for this factor alone has been enough to drive some major financial institutions to exit the market.
