The sheer scale of a select few platforms will allow them to begin to dominate the market over the next few years, according to Platforum's Miranda Seath.
The group's senior researcher said the four largest platforms currently hold less than half (44%) of the market's assets but estimated the benefits of scale would lead to this proportion rising to three-quarters (75%) of assets within a few years.
The Financial Conduct Authority (FCA) last week revealed its intention to undertake a platform review and one of its main focuses will be investigating why platforms do not secure fund discounts for users despite their market power.
The lang cat principal Mark Polson said at the time it had been a "massive failing for platforms" and warned the regulator was now keeping a close eye on the sector.
Although agreeing with Polson that platforms could do more to reduce the cost of investing for clients, Seath argued platforms' market position is a big factor in their ability to secure fund discounts for investors.
She said large scale would help the biggest players barter strong discounts for their clients, while also bringing their own charges down.
Seath continued: "If you're a platform with significant scale which has got a lot of leverage in the market with fund managers, you're in a better position to negotiate - which is why the larger players tend to be able to do it more effectively.
"In the direct space Hargreaves negotiates very hard - it depends on what buying power you actually have. If you have scale, you have the ability to negotiate hard with fund managers and bring your prices down."
The platform market has seen a theme of consolidation gain prominence over the last couple of years with some players looking to increase their scale, including the sale of Cofunds to Aegon and Standard Life's acquisition of the Elevate platform from Axa UK.
The FCA is also going to look at how investment platforms compete to win and retain customers, as well as price competition, but Seath suggested advisers were unlikely to transfer clients away from a platform because of charging.
She said it would be interesting to find out what the regulator considered a "competitive and healthy market" and argued having many platforms would not necessarily create price competition. "Scale is important to the ability of platforms to compete," she added.
After speaking with many advisers, Seath reckoned that, unless anything goes drastically wrong on a platform, client assets would not be transferred away because of high charges as there is "little material difference" in fees across the sector.
She continued: "The advisers' view is that while it may be an absolute nightmare administratively and causes a big headache, if their clients aren't significantly affected, they won't move them because they cannot justify the upheaval.
"What they will do, however, is place new assets on a new platform."
Seath noted "a lot gets made of adviser charging for platform transfers" but went on to defend advisers by saying most would not charge for a transfer and the issue does not stop them transferring when necessary.
She also explained the practice of placing new assets on new platforms has meant the market is forming "legacy platforms" that hold a "dwindling" number of assets.
"Advisers are trying to think about the interests of their clients over their own and it doesn't make sense to transfer," Seath added. "What it does make sense to do is to start using a new platform."
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