“Interestingly, platforms are now exhibiting some of the behaviours of the life sector it replaced,” said Polson.
“It is now in line to be disrupted as it was the disruptor itself. The life companies had a century of dominance, the platforms had 15-20 years. That’s the pace of change we are looking at.
“We like to say that platforms are dead. They had great chance to avoid the sins of the past.”
According to The Lang Cat, disruptors are circling the UK platform sector, which is worth £400bn.
“They had the chance not to compete on functionality and just do the basics extraordinarily well. Platforms only do four things; buy, hold, tell you about it and sell it. How hard can it be – the answer – plenty hard.”
Polson argues the differences between the platforms is slight; they are technology and admin businesses which buy, hold and sell stocks.
The potential disruptors
He believes it will be a competition between technology companies and asset managers for who will upset the platforms’ apple cart.
“The big issue is we have a fragmented and complex industry,” said Polson. “The investor is not reaping any benefits of the economies of scale. As a result, the end investor is paying some pretty frisky charges.
“It is an incredibly interesting time to see if a disruptor will come in and bring investors still closer to their money and what’s going on,” he said.
According to Polson, the companies behind platforms do make money because they are asset managers “in disguise”.
“Firms like Old Mutual are saying we can’t do this anymore we need you to buy our funds. The UK consumer is starting to be met by large national distribution names.
“We are seeing this with Standard life with 1825 and Quilter/Old Mutual and Aviva are heading down that road too. The bet is they can bring it back to where it was before platforms. Asset management is going to be crucial.”
Other potential disruptors are the likes of Pershing, SEI and Platform Securities, which are not just tech suppliers but sit behind and power other businesses.
These businesses, Polson argues, have the potential to “come up into the pack and cut the cost chain”.
Platforms’ shadowy masterminds
Polson also identified the “shadowy masterminds” behind the platforms themselves as potentially the real power brokers.
Most platform assets are run by three companies FNZ, GBST and Bravura Solutions.
“Is the power with the tech providers? I suspect it is because this stuff is hard to build,” he said of the trio.
Robo and D2C
Polson doesn’t have much time for robo-advisers as serious challengers but he recognises the significance of firms such of Hargreaves Lansdown, Barclays, Interactive Investor and Fidelity.
He singled out Hargreaves as an “astonishing, gravity defying business”, despite being the most expensive.
Ultimately, Polson argues the current situation is untenable with UK advisers charging 1%. The total cost drag on a portfolio is often 5% and, while no one is “taking the piss”, it adds up to too much.
He advises the industry to listen to customers and stop analysing itself. A maxim equally applicable internationally.
“The market is ready to be shaken up and that is not just in the UK – it is in Australia, the US, South Africa and northern Europe as well. It is difficult because it all depends on getting the end investor comfortable with ways which can make it more efficient to serve them and bring new models to market.
“We have to ask ourselves in the industry; what have we done with the gift which was RDR? We could have done much better. If you are in other markets I hope you can avoid some of the mistakes we have made.”