Deloitte: Platforms will need £40bn to break even

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Platforms will typically need £40bn in assets to break even, according to Deloitte.

Increased competition and falling margins will mean the average revenue of platforms will fall from the current level of 30bps to 20bps, which Deloitte says will push the break even point from £20bn to £40bn.

As a result it says there will be less than 10 providers by 2018 compared to the current number which stands in excess of 30.

Deloitte lead RDR partner Andrew Power says: “The value of assets held on platforms is estimated to grow from about £200bn today to £600bn by 2018. One consequence of the RDR is that margins will be squeezed with revenues for platforms likely to fall from about 30bps to 20bps. 

“For a platform provider, this could increase the break even point from around £20bn of assets to about £40bn. The result will be that the intermediary platform market will consolidate to fewer than 10 large providers and a few specialists compared to about 30 platforms today.”

Currently Cofunds, Skandia and FundsNetwork all have in excess of £40bn assets.

A number of other platforms have reached profitability with considerably lower levels of assets including Transact, Novia, Nucleus and Ascentric.

A recent study by consultancy and software provider Altus showed platforms’ total revenue in comparison to AUA fell from 80bps to 40bps between 2006 and 2011.

The research, carried out across the biggest 20 UK platforms, showed total revenues of £740m for 2011 compared to revenues of £330m for 2006 with total expenditure increasing to £790m from £380m at the end of 2006.