Will platforms’ race to the bottom cause them to ‘creak and fall over’?

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The focus on cost and charging structures could be leading investment platforms down a path of “mutually assured destruction”, new research suggests.

A survey of 1,056 advisory professionals by CoreData Research found that 27 per cent cite cost, fees and charging structures as the main factor that would encourage them to choose a platform.

CoreData principal for Europe and UK Craig Phillips says: “Adviser sentiment is reflecting what we’re seeing out in the market. The gloves are off as the industry begins to do what every other mature – some may say commoditised – industry does; it begins to compete primarily on price.

“We are entering a perilous stage of market development – think mutually assured destruction but where fall out is not from mushroom clouds but clouded pricing. With platforms short of profits to reinvest, systems will start to creak and fall over – more human error will occur as under-resourced teams struggle to meet demand. And adviser efficiency will consequently suffer.”

Phillips argues that platforms should concentrate more of their efforts on service to justify their charges through a differentiated offering – rather than “playing ‘me too’ in a game of pricing Russian roulette”.

The poll found that ease of use/functionality was cited by 22.9 per cent of advisers and good administration and service by 19 per cent as important drivers of platform selection.

When asked about satisfaction with advisers’ main platform provider, 31 per cent highlighted online transaction functionality, 23.1 per cent reliability and security of the technology and 21.8 per cent ease of re-registering assets on and off the platform.

In addition, advisers said they would like to be able to access discretionary investment management services, Sipps and other complex pension products, and annuities and income drawdown through their main provider.

Phillips says,:“Trends reveal the opportunity for new business for platforms has been in decline since 2011. This is reflected by the fact that satisfaction among advisers towards their main platform is on the rise. More than a third of advisers would now recommend their main platform to another adviser.

“However, there are still areas of the market that advisers would like to see improved and platforms will need to address this given the number of alternative offerings. This is particularly relevant for second choice platforms where the level of satisfaction is not as strong.”