This column from PA editor Tom Ellis appeared in the August edition of Multi-Asset Review but, after FNZ completed its acquisition of rival GBST, we thought it would be worth revisiting his thoughts of what it would mean for advisers if the deal went ahead ...
Re-platforming has without doubt been the most disruptive activity in the platform space in recent years. When adviser platforms have tried to shift their underlying technology from one provider to another, it has caused havoc for the advisers, paraplanners and administrators who are simply trying to service their clients.
Now, however, as the usual re-platforming suspects iron out their issues and Old Mutual Wealth readies itself to embark, finally, on its mammoth migration, the spotlight needs to be retrained onto the businesses that stand behind, or perhaps beneath, these re-platformings.
When a firm does re-platform, it effectively moves all of its data from one technology provider to another in a bid to upgrade its services and enjoy a fresh start.
Now, by my count, at least - others may add one or two other names into the mix - there are 18 major adviser platforms. And two companies, FNZ and GBST, provide the underlying technology to 10 of them - soon to be 11 once Old Mutual Wealth makes the switch to the former.
FNZ provides the tech that powers adviser platforms such as Aviva, Embark, Standard Life's Wrap and Elevate offerings and Zurich. For its part, GBST drives the platforms of Alliance Trust Savings, AJ Bell and Novia as well as Aegon Retirement Choices and The Aegon Platform (formerly Cofunds).
Right, this is where it gets messy but please do your best to keep up with the acronyms … FNZ has just purchased software provider JHC, which runs wealth management tech that links into the AJ Bell and Alliance Trust Savings platforms.
Yet, as the above two lists pointed out, FNZ's platform tech rival GBST provides the underlying technology that powers both AJ Bell and Alliance Trust Savings - which means FNZ now owns a company that plugs some of its wealth management software into its rival's technology.
You would have to think this could be a bit of a headache - not only for the tech providers but also for the platforms themselves as they iron out the kinks in this arrangement.
These global companies, which provide technology for firms all over the world, hold all of their secrets in their data and software. As such, they do not want to share any more than they need to, begging the question as to whether this relationship between FNZ and GBST through JHC could prove too close for comfort.
What makes the dynamics at play here more interesting still is that GBST is currently up for sale. And, while investment management software and services provider SS&C Technologies appeared to be the frontrunner after entering talks with a bid of £140m on 3 July, FNZ is now in pole position.
Business News Australia reported on Monday that FNZ has outbid SS&C, with GBST entering a binding agreement for FNZ to acquire it at a valuation of £151m. Clearly, this could have major consequences in the UK platform space.
Indeed, FNZ purchasing one of its major rivals could potentially lead to a huge headache for financial advisers and platforms - not to mention - and apologies for introducing another acronym into the mix here - the Financial Conduct Authority (FCA).
Majority of the market
For if FNZ successfully takes over GBST, then it would provide the underlying technology for the great majority of the adviser platform market. Not only would this make it arguably more difficult for platforms to differentiate themselves from each other in the future, it would clearly also bring competition and risk considerations.
For one thing, FNZ would - again, at present hypothetically - be providing technology to platforms that look after around £260bn of £400bn total advised platform assets in the UK. That would have to raise questions about competition in the adviser platform space - an area of particular focus for the FCA throughout its platform market study.
And it would also, surely, attract the regulator's attention for another reason. When the majority of the market is performing its tasks on a single technology provider, there is the potential failure risk.
If that single provider suffered tech troubles, then so would the majority of advised investments and savings in the UK. If something more dramatic were to happen to that provider, then that could only raise more questions and more concerns.
Re-platforming will no doubt continue to make headlines and draw the ire of advisers and clients who have to suffer through such projects - and rightly so - but the deals being done one stage further removed from them could have equally significant implications for the future of the sector as a whole.
Tom Ellis is news editor of Professional Adviser
A version of this article appeared in the August issue of Professional Adviser's sister title Multi-Asset Review, which is now out. To make sure you receive your own copy of the next issue, please do register your interest here
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