So there have been some interesting platform stories in the trade press to start off 2012. We are definitely starting to see the temperature start to rise as we head towards RDR!
We were really interested in a couple of stories from Cofunds – they’ve called for more clarity on the treatment of legacy assets for re-registration and also expressed a hope that the industry doesn’t get hung up on the labels ‘restricted’ or ‘independent’.
Skandia started the year with some interesting predictions – mainly that the number of platforms around serving IFAs would reduce to 10 and the average price would reduce by half to about 0.25%. There’s also an interesting piece on their RDR plans here.
Our take on these things is always filtered through our specialist view, which is running and resourcing large, complex change programmes. And it strikes us that really, both of these are tech stories.
Let’s explain. The issue with re-registration is that the FSA have said that re-reg does not have to be an advised event. That means that in-built trail commission can continue to be paid after a re-registration event. But new units or shares in the same fund or OEIC bought on an advised basis can’t pay out that commission; it all has to be done on adviser charging. Cofunds’ point is that it’s extremely difficult to keep proper records so that you can ‘split’ an existing holding into parts that generate trail and parts that don’t. You’d also need new business rules around that for which holdings you sell first to generate income or pay charges, for example.
Our thing is – this shouldn’t be impossible to do. We understand that providers have a huge amount on their plates and this is an extra headache they don’t need. As Stephen Mohan points out in the piece, the ISO messaging standards the providers have developed don’t take account of it. What we take from this is that providers with a forward looking, well-run and disciplined change and technology function will be able to flex to deal with these requirements. Providers without that solid foundation will struggle, to their commercial detriment.
That kind of leads us to the Skandia story. Will there only be 10 platforms left in a few years? We wouldn’t feel confident in making that prediction, but we do think it’s inevitable that we’ll see some consolidation in the sector over the coming months Some of that will be driven by competitive pressure, but we think the greater driver will be the demands of technology development of exactly the kind described by Stephen Mohan above.
Our prediction is that we’ll see the smarter, more able providers start to compete and differentiate on operational and technological excellence. In effect they’ll use RDR as a springboard for making the kind of improvements that genuinely create efficiencies for IFAs, and valued outcomes for consumers, which sounds pretty good to us.
