The platform world has changed a lot over the last decade, writes David Simpson, but the coronavrius pandemic might be the catalyst for rapid change for adviser platforms and increased automation...
The platform market has boomed over the past 10 years. From its origins in fund accumulation, we've seen the launch of new propositions that encompass a wider range of services and specialities, while traditional platforms have increased in scale.
Bringing together back-office technology and front office components with people and processes to deliver wealth management propositions has proved extremely successful in gathering assets under administration (AUA) while providing a better service to clients and advisers alike.
However, although the market has flourished in terms of the number of platforms and the amount of assets they administer, generating significant profits continues to be a challenge for the majority without diversifying to generate additional revenue from either manufacturing their own funds or having their own distribution.
Margins continue to be squeezed by regulatory costs and competitive pressure and many remain inefficient, with too many fixed costs. According to Altus's 2018 whitepaper Giving your platform wings, despite huge growth in AUA over the period, the average advised platform fee has fallen from 54bps in 2011 to 24bps in 2016. This figure has continued to fall in more recent years.
With fixed costs increasing and revenues reducing, a perfect storm is building unless platform can deliver their services more cost effectively.
Greater automation is a crucial step in helping platforms reduce fixed costs. The last decade has seen major advances in technology, particularly around the use of application programming interfaces (APIs), which allow different systems to connect through standard messages and protocols. This technology can join internal and external systems to automate processes and create efficiencies, removing the risk of expensive manual interventions.
Yet many platforms still operate legacy websites with limited integration into the back-office, requiring advisers and providers to re-key data. And although some businesses have recently launched modern and engaging digital front-end portals, not all processes are available online due to the lack of APIs in their back-office systems, resulting in a continued reliance on paper, emails and phone calls.
The demands on technical resource to implement continued regulatory change and product evolution, coupled with the need for administrators within advice firms to find manual work-around solutions to the lack of joined up systems, has meant that integration and the journey towards full straight through processing from front to back office has not been an urgent priority for many platforms.
However, the impact of Covid-19 and the need for businesses to quickly move operations to people's homes may be the catalyst for change as platforms reconsider their operating models. Working remotely has been a major challenge for many platforms who rely heavily on manual processes, posted documents, wet signatures and on-premise technology hosting that cannot be accessed remotely.
NextWealth research in May found that, across 20 advised platforms, 42% of processes require a scanned original to be sent to the platform. Only one platform reviewed didn't require a paper or scanned form with a client signature for at least one process.
While in normal times dealing in paper documents and wet signatures can increase administration and cause delays, in a remote working environment it creates a serious disruption to service. Time and time again we hear advisers saying they just want their platform to be easy to use and provide a good service across everything it claims to offer.
The technology already exists to create online journeys straight through from the front office to the back-office across a broad range of online instructions, with easy integrations to other systems and tools. It should be a given that platforms allow advisers to work seamlessly across desktop, smartphone or tablet to perform actions and access information, client documents and tools as easily when they are on the road or at home as when they are in the office.
Unfortunately, all too often this is not the case. Adviser and client frustration over the lack of a full range of online journeys on platforms is not new, but the Coronavirus lockdown has really highlighted some of the inefficiencies within platform businesses. It is a wake-up call to platform senior managers, compelling them to urgently review operations and swiftly execute change to continue to win advisers hearts and minds by making their life and that of their clients easier.
The pandemic has forced us all to quickly adapt to new ways of working, with far greater reliance on online systems across all aspects of our lives. The industry was already evolving, but Covid-19 has undoubtedly provided a catalyst for faster change.
In order to remain competitive and continue to drive margin for shareholders, platforms need to seize the opportunity to continue their digital transformation, reducing time spent on administration, creating efficiencies across the industry and improving service for the benefit of all.
David Simpson is head of EMEA at GBST
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