Even before the Retail Distribution Review was a twinkle in the regulator’s eye, the UK platform market was rife with rhetoric, highly competitive and an active participant in fund distribution challenges – the race for assets and an ensuing price war.
One clear trend in all of the above, according to Novia Financial founder and chief executive officer Bill Vasilieff, was the foray by many a large institution – largely life companies – into platform services, which offered them an opportunity to earn additional basis points and increase profits.
The lure of the platform market is clear, says Vasilieff. With between 15 and 18 platforms administering funds from about 80 asset managers, he says the market has the potential “to feed everyone” with “around £2-3trn that has yet to be platformed”.
Avoiding the exodus
But despite these rich pickings, the larger institutions started to leave the market.
American Express in 2006 and Macquarie in 2011 were two early major exits, while last year Legal & General was reported to be seeking a buyer for Cofunds and French insurance giant Axa put Axa Wealth, which includes Elevate up for sale.
Why the exodus? Vasilieff says many of the big players were not skilled in building platforms and failed to understand the technology or resources they required to make a platform cost-effective for advisers.
“Many of them saw their platform business as an asset-gathering machine, without realising they actually needed to run it properly,” Vasilieff says. “Some do not seem to recognise that plaforms are businesses in their own right.
“The money wasted on technology is eye watering,” he adds. “We have heard figures of more than half a billion being spent by some of the big players trying to get it right, whereas people like us, Transact, Nucleus, we see platforms as a very viable business.”
So how will the market now evolve? Those firms that have nailed their core proposition, says Vasilieff, are now in position to offer additional services – such as the discretionary service offered by Novia, under sister brand Copia.
Vasilieff and his team launched the in-house discretionary fund management (DFM) service in October 2013. It is currently available only to Novia advisers, but Copia plans to roll it out beyond its own doors over the coming year.
But does the new DFM service not just cannibalise the offerings of the DFM panel already listed by Novia? He quickly dismisses the suggestion. The Copia service has been built by mathematicians, he explains, and is based on quantitative models that select investments.
