As regulatory demands mount and operational inefficiencies persist, UK investment platforms face a pivotal moment. In the following analysis, Wealthtime CEO Patrick Mill examines how platform evolution, as well as smarter strategic partnerships, could better support the complex needs of wealth managers and DFMs in a changing market.
When investment platforms first came into being in the UK some 30 years ago, the bold concept was to apply technology to make retail investing quicker and more efficient for advice firms and individual investors alike. They offered an overarching solution designed to provide safe custody of assets, fund and stock trading and related payment processing, including trading fees, client charging and advice firm remuneration, and investment performance reporting.
The idea has been a huge success. Over the last three decades, platforms have grown in number, providing the backbone of modern wealth management. However, cracks are now beginning to show.
The difficulties today
Many platforms find themselves caught between increasing regulatory scrutiny, growing adviser and investor expectations, and the escalating costs of staying competitive. While assets under management have continued to rise, so too has the cost of ongoing technology investment. Somewhere along the line, technology has fragmented and many platforms have been forced to rely on manual processes to plug the gaps, interfering with their ambitions to scale.
Despite a wave of new entrants over the past decade, a bird’s-eye view of the UK platform market today reveals an excess of relatively narrow propositions. This often forces advice firms to use multiple platforms to fully deliver their services and meet all their clients’ needs.
While the external market drivers for the platform sector appear healthy, with consolidation of advice firms, private equity investment, and continuing technology enhancements, the platform users themselves may have a different perspective. They are the ones having to deal with legacy technology and disjointed processes on a day-to-day basis, hampering their efforts to deliver the efficient services and good outcomes expected by clients and demanded by the regulator.
Platform providers that fail to meet the evolving needs of their customers are at risk in the current environment. Firms increasingly expect, and rightly so, trusted capabilities, reliable support, meaningful service level agreements and key performance indicators, and operational resilience. Without these, further consolidation of the platform market seems likely. Platforms failing to meet advice firms’ expectations, relying on inertia to stay in business, or making it difficult to move client assets elsewhere, may find themselves on shaky ground.
The better tomorrow
Platforms need to adapt to survive. Those that aren’t prioritising automation, real-time data, fully straight-through processing, the elimination of rekeying, and emerging AI capabilities will be left struggling to hold on to their users.
The many inefficiencies seen today in firms’ back offices will have to be addressed as a priority. For this to occur, platform providers must focus on activity that adds value, rather than just running routine tasks.
As I see it, scale is essential if platforms are to make the necessary ongoing investment in service and technology to deliver the required continuous improvement. To this end, adopting a partnership model is likely to become the most effective route forward. A platform looking to thrive in the next decade and beyond should consider forming strategic alliances that bring together expert partners, whether in technology development, service delivery, trading, custody, or data management.
By building a cohesive, connected ecosystem, platforms can integrate core business flows without the need for manual interactions. This will eliminate the process delays and inaccuracies too often experienced now. For advice firms, this would mean access to a wider and more flexible set of services delivered in a compliant, effective manner, while gaining 24/7 visibility of where customer business resides in the pipeline.
The opportunity is there for platforms to replace outdated systems and disjointed support services and redefine their value in the advice ecosystem. Taking a collaborative approach, working with best-in-class partners with experience, resources, and scale, will change the game completely for UK platforms. This is an opportunity to set a new standard for platform services, or risk becoming irrelevant.
