Fears raised over platforms’ long-term future

Adviser platforms’ profitability remains the number one worry in the industry despite assets growing at a fast rate, according to AJ Bell chief executive Andy Bell.

Speaking at the AJ Bell-hosted Investival conference in London last week, the platform boss said platforms will continue to struggle to reach profitability, particularly those undergoing replatforming projects.

He said: “The most worrying thing in the advice platform market is that the industry doesn’t make any money still and I am not sure anytime it will make money.”

Bell pointed out that assets on all platforms were up 10 per cent since last year to £400bn and overall revenue was up 2.8 per cent to £1.1bn, citing recent figures from consultancy Finalytiq.

Bell said: “Revenue only grew marginally reflecting the price war that is going on at the moment, it is not growing quite as fast.”

Bell notes the aggregate consolidated loss for all platforms for the financial year is £62m, which was a significant increase from £19m a year ago.

He said there is “a strong correlation” between the platforms making losses and those that are going through replatforming projects.

As of September, Cofunds is the platform with the largest proportion of users migrating to other platforms, counting for 32 per cent, according to Platforum figures. The platform was followed by Alliance Trust Savings, with 22 per cent, Old Mutual Wealth, also with 22 per cent, and FundsNetwork with 21 per cent.

Overall, Bell notes that in 2016, there were £200bn transiting across platforms for £828m cost, while for 2017 the estimated of assets transiting is £220bn for £860m cost. Commenting on the figures, Bell said platforms don’t seem to have made much progress to face the various challenges in the industry.

Bell’s remarks come as Standard Life announced its adviser platforms have broken the £50bn assets under administration mark, as it saw net inflows of £6.7bn over the past 12 months.

That result follows Standard Life acquiring Elevate from Axa last year.