17th May 2013

This week has seen us busily totting up the scores for this quarter's Platforum Market Monitor. Each quarter, we review how adviser platforms have performed, taking into account costs, user feedback, growth momentum, AUA growth, financial strength and functionality. A few celebratory pints at EC4 are in order as Transact tops the Q2 Platforum Market Monitor, with Elevate and Sippcentre taking second and third place respectively. (That could be another platform categorisation – what would be the celebratory tipple of choice for each platform? Pints of lager at Transact; gin and tonics at Elevate; pints of bitter at Sippcentre?) Have a look at the top five scorers on our homepage.

When it comes to adviser feedback alone, Parmenion has taken top spot. Sample size is always an issue with the smaller platforms. They have fewer than 50 reviews so we leave it to advisers as to whether this presents a reliable picture – it's pretty consistent feedback so we're going with it. Transact and Nucleus take silver and bronze on the User Leaderboard, followed by True Potential then Novia. Any adviser can look at the detailed reviews on our User Leaderboard, which is the best way we have found to give you an impartial, expert, customer view about how each platform is doing. Nosey platforms or providers not allowed in here as there are some pretty genuine, candid reviews from advisers so we keep this behind closed doors.

In addition to a look at platforms, this quarter's Adviser Platform and Distribution Guide, to be published next week, takes a look at the world from the investment perspective too. Aside from mutual funds, the most common investment instruments advisers say they'll be including in client portfolios this year are cash (53%), bonds (42%) and investment trusts (41%). Listed securities have seen the most significant increase (10%) in propensity to use since last quarter, with over a third (37%) of advisers now saying they'll be included in client portfolios. And what investment strategies will they be using to manage these portfolios? Just under half of the advisers we talk to are using only insourced solutions (insourced model portfolios and bespoke fund picking, governed by an investment committee), while those who do outsource to a third party DFM or other partner are on average doing this for a little more than a quarter of their business today. We hear much talk on the virtues of outsourcing, particularly in light of advisers' growing desire to free up in-house resource for building and managing relationships with clients, but there is still nervousness around relinquishing client control, and uncertainty about how cost of outsourced solutions stack up against investment returns achieved.

Finally, the move to clean share classes gathers pace with more being added to platforms on a daily basis.

Good luck to everyone still on PIMS. I did manage to sneak myself off the boat on a tender on Thursday. Sadly, fantasies of a Man From Milk Tray/ James Bond episode were abandoned as I stepped on a rusty boat with an economist, three fund managers and some off-duty waiters. Hey ho. A girl can dream.

Have a lovely weekend everyone.

Holly

10th May 2013

I think this has been quite a significant week where the longer-term – and broader – implications of the FCA Paper 13/1 are starting to be played out.

Advisers are still contacting us with lots of questions about trail on platforms. With contributions from Cofunds' Verona Smith, Novia's Bill Vasilieff and threesixty's Phil Young, we've pulled together a few answers to some of the questions which have been fired our way. It's not just advisers who are confused. Fund managers are darting around the City in a collective panic about who is going to drop their clean share class trousers first.

Meanwhile, back at the coalface, and advisers are up in arms about reports that Aegon and Standard Life are turning off trail in certain circumstances. It's difficult one to comment on. Of course this p*sses good advisers off, who make the argument that advice is not necessarily correlated with activity. Having your revenue model rocked is not fun for any business. But I have absolutely no doubt that other providers will follow suit and that this is an inevitable market direction. Rather than looking for wriggle room or waiting for individual firms to confirm their future approach to this, it does feel as though it makes sense to read the writing on the wall and to go with the tide rather than swimming against it, venting spleen in the blogs. Although still in consultation about this, it feels safe to say that the FCA would "not be upset if a market of cleaner products came sooner rather than later." Not my words btw.

And for clarity, advisers, with the very very odd exception, you can safely assume all your fund based trail commission on platforms will stop by 2016 at the very latest. This has gone beyond opinion now. It's policy. Final.

Adrian Grace, Aegon CEO, caused a stir yesterday with a slightly impulsive message posted in response to a Money Marketing article. But let's separate the issues. Complaining about a journalist's interpretation of a story is fair enough and something that anyone who feels they have had their message misinterpreted will understand. Having a public and digital strop is another. But this is difficult tightrope to tread. Ya boo! we shout at the life co bosses who don't engage and appear remote and aloof. Ya boo! we shout at the life co boss who has a human reaction. Stones and glass houses and all of that. Maybe if there were fewer automatons running these businesses and more people who actually cared, we wouldn't have got into some of the historical messes we face in the first place?

In other news we wish Cofunds CEO Martin Davies well as he exits for pastures new. I like Martin and I think he has steered the business well in his time there. Suspect the shake-ups are not over yet. Very interesting is that his replacement is not a platform man, but an L&G man. There's an inference to be drawn there about how the platform will be used under the bigger L&G umbrella. In my humble opinion. Long-standing and super experienced Chairman Charlie Eppinger is a vital pair of hands for this business right now.

Great excitement chez the Mackays this weekend as the pigz head to an Alvin and the Chipmunks party and little old me is heading to Wembley to see some blokes play football. Sartorial crisis! What on earth does one wear to a Cup Final?

Holly

3rd May 2013

A confusing week with a few too many "am I having a blonde moment?" episodes.

Just when I thought I'd got my head around the FCA Paper (our Idiot's Guide provides a summary of our views and more importantly those of 13 Platform Big Wigs), it all got a bit Twilight Zoney with Skandia's announcement about their unbundled share classes with rebates. Un-bun-dled-share-clas-ses-with re-bates. No matter how many times I say it, it doesn't get any easier.

It's one of those tricky things which can (and has) lead to howls of derision – but it can offer lower net costs to customers. And, howling competitors, that can be a good thing. Call me simple, but if others could do this, why wouldn't they do it? I've gone a bit headgirly here, but I don't enjoy a debate which doesn't feel fair. Suddenly everyone's scoffing at the estimated 6-8 bps extra for ISA and pension clients, but we've spent the last five years navel gazing about single digit basis points when it comes to platform pricing differentials.

Nonetheless, "unbundled share classes with rebates" (stained?) is a really tricky marketing message to get across and I'm not sure it's a helpful addition to an already confused lexicon. I don't see this as the end of the superclean debate and think it not unlikely that we'll end up with clean, superclean and stained. All very washerwoman for an industry which is obsessed with car analogies.

In all of this we seem to have lost sight of the end-customer as platforms squabble, point score and finger point. Who will survive, I am asked on an almost daily basis. Those who survive will be those who don't obsess about their heritage or their competitors, but their clients.

For those who do want to focus on the customer and build new, innovative, engaging stuff, check out our Top Gear event. We've pulled together three agencies which specialise in social, mobile and apps who will share learning and case studies from our industry and others; we have demos from UK and US groups with tools to address engagement, reporting and the customer journey; KPMG will be sharing some updates into the world of platforms and distribution and we'll be looking at D2C with help from former Interactive Investor CEO Tomas Carruthers. Anyone in charge of building a customer proposition should join us on 4th July for our digital frenzy and drinks to close, kindly sponsored by Origo.

Some stats to close. As at Q1 13, advised platform assets soared by 9% to £244bn – in no small part down to better stock markets. Cofunds posted the biggest £AUA growth with a cool £4.5bn increase; Aviva was the fastest growing platform, increasing assets by 25%, followed by Parmenion then Novia.

Have a lovely long weekend everyone. The sun is shining and the rugrats and I are off to Hampstead Heath, before we hit Willow Farm for a Peppa Pig day on Sunday. I have grown to hate that over-rated lump of bacon but hey ho. For those who missed it earlier in the week, a quick read of Andy Bell's West Side Story-inspired screenplay about the FCA Paper will provide a fun slide into the weekend. Who says that actuaries are weird?!

Holly

Great excitement today as the FCA published the long awaited PS13/1 confirming policy on payments to platform service providers and cash rebates from providers to consumers. On reading the paper it’s actually a bit of an anti-climax and it pretty much just rubber stamps what we’ve heard before. It’s a bit like a wedding night. Talked about for months and then it arrives and, well, I don’t know about you guys but I had quite a lot of champagne and... well let’s move on.

The basic headlines are:

1. Cash rebates are banned although cash rebates of up to £1 per fund per month are still allowed. Unit rebates are allowed but – as we know – taxed. So pretty unappealing in most circumstances. Adiós rebates.

2. This introduces us to the theme of competitive pricing – in the absence of potent rebates it’s time to gear up for the super clean share class debate which we think will gather momentum apace as laundromat analogies get thrashed about. Interesting Comment #1 from the paper – "Varying prices through different share classes may be a more attractive option given the recent clarification of the tax position." Here we go.

3. Total Cost of Ownership may have greater prominence as a concept moving forward. Nonetheless a challenge has been raised to vertical integration with Interesting Comment #2 – "if a platform service provider is also a fund manager, we would not expect the platform to be labelled as ‘free’ if the consumer invests in funds operated by that manager." Hmmm.

4. Legacy – this is a big one. What do platforms and providers do with old stuff which is still paying a commission to advisers? All legacy payments on platforms will be banned from April 2016. In simple terms, platforms have got 3 years from now before they will be required to turn it off. And three years to sort systems out. At a total one-off estimated cost of up to £62m. There will be a period of disruption over the mid-term as advisers are forced to re-visit 'dormant' clients and some of these will be re-housed. We estimate that about a third of customers on today's big three platforms have not been reviewed for over three years.

5. Platforms will still be able to charge fund managers for some stuff such as corporate actions, pricing errors and the like. But it won’t be very much. So no room for sneakiness here. But here's Interesting Comment #3 – "We can also confirm that it was not our intention to prevent payments made for advertising... However, we have made it clear in the Handbook text that we expect any charges made to be reasonable and proportionate, reflect the service being provided and not vary inappropriately between different product providers." From a consistency point of view this feels like the Achilles heel of the paper. Define reasonable.

6. Interesting comment #4 – "It was not the intention to prevent platforms being paid by intermediaries for any services they provide to an intermediary firm, and we have clarified this point in the rules." We think this model will grow as basis points charging models are called into question.

So those are the headlines. We’ll be digesting the paper in full over the next few days and have invited all platform CEOs to share their comments and views with us. We’ll be adding this all together in more considered summary and bringing you our “Idiot’s Guide to the FCA Paper – Platforms PS13/1 on Monday next week."

In other news, Transact has re-jigged its pricing this week and made it cheaper for those portfolios of less than £300k. Rather than repeat what we said in an article earlier in the week, we thought we’d hand over to Gizoogle for a different flavour on our take on this. Ian Taylor, Transact CEO, I dedicate this to you. “Transact has re-jigged its pricin todizzle. It make me wanna hollar playa! Da impact aint gonna be felt by forma Platinum clients wit portfolios up in excess of £300,000. This be a exercise ta address competitivenizz fo' dem hustlas up in tha sub £300k bracket.” Quite. Don’t forget the impact of cash and interest rates on overall cost to client – we are reminded that, on average, Transact customers have 10% in “chedda” so be sure to check out the latest interest rate your platform is paying.

Have a lovely weekend folks. Over and out,
Holly

19th April 2013

Q1 has been a stunning quarter for platforms. As the majority of models are heavily geared to the performance of the stockmarket, this has been a quarter when that pays off.

We don't have all the data in yet but I can confidently say that – for the first time ever – AUA across direct and advised platforms rose by more than £30 big billion in Q1 this year. This makes FDs very happy. Let's assume the average platform revenue is 35bps (there are those who are lower, there are those who are higher but humour me). That suggests that the platform industry took over £26 million more revenue in Q1 than it did in Q4 last year. Back of a fag packet stuff but in times of rising stock markets it illustrates why platforms are largely reluctant to move away from a bps charging structure to a flat fee model paid by the customer or the distributor client.

Hargreaves reported great results to the City. Shakira's hips don't lie and in our world the stock market "don't lie" – the share price jumped as AUA galloped to £35.1bn, net inflows were £1.8bn and 30,000 new clients piled in (look and weep new innovators with small brands and expensive customer acquisition costs).This year it is likely we will see Hargreaves clients top half a million people – that would be about 4.6% of all UK investors.

But this is not a story of direct platforms picking up former IFA clients as a result of RDR. We're still gathering data in the advised platform market but Fidelity grew by some £4bn and Cofunds was up to £52bn as at March. Across the board we're hearing about 10% AUA growth.

A number of the larger direct platforms attribute their growth to new customers who are refugees from bank advice. They're younger than the traditional self-directed customer. A bit less confident. Making a foray into DIY for the first time. So this world is expanding but it's wrong to assume that this is at the expense of IFAs. So far.

Have a great weekend everyone. The Brimstone Beasts and I have been invited to Fairy World which will invariably be some Ecoli-riddled soft play area with a few fairies who stink of fags and have seen better days. But hey ho. That's marketing! If the piggolinos think they're in Fairy World that's all that matters. Is that where we go wrong? In Financial Services we market Fairy World to the Mums and Dads – we worry too much about explaining the availability of cappuccinos and cleanliness and how it all works. I do think RDR means the winners will need to get better at marketing to the 'kids' too. But I digress.

Word on the street is that the FCA had its board meeting yesterday and some expect to see the paper next week. Bring it on.

Holly

12th April 2013

Back from our Easter hols, and talk is of little other than rebates. I'm afraid I'm tired of this endless focus on revenue structures which has strayed far off the original path of clarity and fairness for the consumer. It deflects the conversation from innovation and doing good stuff for customers. No-one has confirmed the date of the FCA paper release but if we think the board meeting will be the last Thursday of the month then 29th or 30th April seems as good a guess as any.

There seems little point in speculating now about bare, clean, dirty. Just bring on the paper, tell us what the rules are, and then let us all get on with it.

I wouldn't like to be in the FCA's shoes right now. HMRC has really thrown a spanner in the works with their bonkers decision to tax unit rebates. I thought about this in the shower on holiday, as I looked at that little sign which told me that the hotel cared about the environment – and so left the air con on all day, had no recycling facilities but cared so much about the environment that they couldn't be bothered to wash my towels. Short-term greed is on the agenda, not the longer-term good of our planet. What do HMRC think? We have a pensions crisis, a challenged economy, and only 10.8 million people with any form of investments. So don't pretend to care about the long-term greater good whilst working out how to pocket more today.

But I digress. Regardless of the FCA paper, market forces are moving towards a world of clean share classes, with increasing adoption reported over the first quarter of the year. The big unknown remains how large groups will get better deals for their customers, as they should. Fund managers will be inundated by groups with relatively small assets saying they want the same deals as Skandia, Standard and Hargreaves. It will be interesting to track how that pans out.

Congratulations to Ascentric this week who announced a nice profit – £1.8m pre-tax profit was reported – a substantial jump from last year which is good to see. Elevate also announced they hit £6bn so congrats there too. We're still gathering data but Q1 was a pretty good quarter all round for platforms – we imagine we'll see circa 8-10% growth in AUA over the quarter.

Have a great weekend folks. We flew in from Bangkok on Tuesday. I was sitting on the aeroplane at 2am with a wired three-year-old on my knee, watching Wreck-It Ralph. At 4am on Wednesday, Hamish was building Lego castles in his bedroom. If anyone from the Government who wanted to make me a Baroness is reading this, ignore my earlier rant and put it down to jet lag. I love HMRC really.

Holly