Roughly a quarter of platforms assets have either moved or are in the process of moving from proprietary technology to an external supplier in the past year. A key benefit of outsourcing is that the cost of development is shared rather than shouldered alone, so keeping up with changes in legislation and customer needs is more cost-effective.
The market’s move towards external providers has also meant there is now much more standardisation of processes, so there is now a basic level of functionality expected as the norm by advisers from all platforms for new business.
However, beyond this basic functionality, platforms still differ as to whether they offer more sophisticated tools and processes. For instance, research by The Lang Cat for Zurich earlier this year found that just four out of 14 platforms had a mobile app for client accounts. Perhaps more surprisingly, only eight of the 14 had a platform that was fully optimised for mobile access. While it could be argued that having an app is not essential for advisers, the prevalence of mobiles and tablets as a business tool means that having a platform that can be viewed on a mobile device is becoming indispensable.
In addition, legacy assets remain a problem for many platforms, with billions of pounds of assets yet to be transferred to the up-to-date technology that takes new business flows. With the heightened focus on savings and investment in the UK, thanks to auto-enrolment and pension freedoms, it is important for platforms to provide greater access and engagement for advisers and investors.
The need to allow consumers increased access to their pension assets in particular means that life companies must work on ways to transfer their back book on to more flexible technology that will also provide a more cost-effective way to administer the assets.
As we have seen in other industries – such as in the rise of online retailers – there is huge potential for financial services to embrace digital solutions to present data in a clear, personalised and easy-to-digest format. Offering mobile functionality through calculators, tools and secure messaging can enhance both the platform-adviser relationship and the adviser-client relationship, enabling more effective and efficient service across the board.
Technology continues to move on apace and the current buzz is around the potential of blockchain to disrupt the financial services industry. Although investment administration has moved on with the evolution of platforms and that digitalised trading occurs in milliseconds, investment is still an inefficient process. Settlement still takes two days and there is the need to reconcile records between participants and for centralised providers to manage risk and facilitate communications. Blockchain has the potential to improve sharing of information, reducing risk and costs by creating, in effect, a mutualised central securities depository. For platforms, this would mean more transparent, secure and faster investment transactions and in turn lower costs for advisers and clients.
However, to facilitate real-time settlement, ideally participants need to know who’s who as early as possible in the transaction process, but current blockchain models go to great length to anonymise participants. The ability to short sell, net-off intra-day transactions and borrow or lend stock – which contributes to liquidity – would be rendered uneconomic. And back-office systems would still be required for internal accounting, client value-add and other activities.
