Questions being asked about how replatforming project got so far along before action was taken
Advisers using the Old Mutual Wealth platform could face some “tough decisions” after the provider cancelled a contract with IFDS to complete its replatforming project at an estimated cost to clients of £800 each.
Old Mutual Wealth announced yesterday it was dropping IFDS as its technology provider and will start working with rival technology firm FNZ instead.
Of the £330m spent on the IFDS replatforming project to date, £110m relates to “heritage business”. Old Mutual Wealth had previously estimated the cost of the replatforming project with IFDS could reach £450m.
It says cost estimates for the rest of the project with FNZ are between £120m and £160m.
The Lang Cat principal Mark Polson calls the sums involved in the project “eye-watering”.
He says: “We reckon, based on Old Mutual Wealth’s own cost predictions, the replatforming cost so far for each customer is in the region of £800; with 400,000 customers that’s a hefty bill.”
Polson questions how the replatforming project got so far along before the “hard decision” was made.
He adds: “We’ve said before there is no recorded instance of replatforming going well. There are lessons to be drawn from this – one of which is an open question about whether it is better to concentrate on the fundamentals of getting client custody, trading and administration right, or whether it’s better to try and win the functionality war.”
Zurich retail platform strategy head Alistair Wilson says advisers should not underestimate the scale of a replatforming project and the potential for it to go wrong, resulting in reduced service levels.
He says: “So what should advisers do? The most obvious conclusion is the platforms they are using must be able to meet the needs of their clients’ today. And if they’re don’t, some tough decisions need to be taken.”
Wilson adds: “Therefore, advisers should take a hard look at their platform partners to assess, or reassess, the impact of these changing market factors and whether their original choices still stack up.”
Platforum head Heather Hopkins says: “The estimated costs and timeframe, while seemingly ambitious, are in line with the original forecasts.
“One concern we have is the timeframes for some fairly standard functionality is out of step with the market. In particular, cash account functionality but also discretionary model portfolios and exchange-traded funds – that are standard offering on most platforms already.”