A platform price war is headed our way in 2009, threesixty predicts.
After slow and steady growth in the IFA sector throughout 2008, threesixty partner Phil Young says the more established fund supermarkets will expand with additional tax wrappers.
“During this period of gradual change, with newer platforms cautiously growing their distribution, there is likely to be little pressure on price,” he says.
“At a certain point, however, which could be as early as mid 2009, market dynamics will change.”
Young predicts IFA usage will increase, while a small number of platforms become dominant.
Chris Smeaton, James Hay propositions and e-commerce manager, agrees with threesixty - saying he expects overall wrap market charges to reduce by about 50% over the next five years.
"Many providers have made substantial investment in technology during 2006 and 2007," he says.
"The benefits of this will start to be seen in 2008 and after a period of payback these providers will be in a position to ramp up volumes in 2009 and 2010.
"This is when prices will start to fall to attract new business and win new distribution agreements."
Young says current platform differentiators – including service levels, administration quality, usability and functionality – will be less significant as underlying technology evolves.
Threesixty says these advances may allow niche players such as discretionary fund managers, or those able to compete on price, to enter the market.
“A successful new wrap, or one of the major players looking for more market share could easily trigger a platform price war,” Young says.
“This threat is important to encourage innovation and competition and to keep the marketplace from stagnating.”
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