Posted In: Wealth Management Administration
Is coronavirus the catalyst for change in platform world? Our Head of EMEA David Simpson believes the coronavrius pandemic might be the driver of rapid change for adviser platforms and increased automation.
The platform market has boomed over the past 10 years. From its origins in fund accumulation, we’ve seen the launch of new propositions that encompass a wider range of services and specialities, while traditional platforms have increased in scale. Bringing together back-office technology and front office components with people and processes to deliver wealth management propositions has proved extremely successful in gathering assets under administration.
However, although the market has flourished in terms of the number of platforms and the amount of assets they administer, generating significant profits continues to be a challenge for the majority without other sources of revenues from either manufacturing their own funds or having their own distribution. Margins continue to be squeezed by regulatory costs and competitive pressure and many remain inefficient, with too many fixed costs. According to an Altus whitepaper back in 2018 “Giving your platform wings”, despite huge growth in AUA over the period, the average advised platform fee has fallen from 54bps in 2011 to 24bps in 2016 and this figures has continued to fall in more recent years. So, with fixed costs increasing and revenues reducing, we have a perfect storm building unless platform can deliver their services more cost effectively with automation at the core.
The last decade has also seen major advances in technology, particularly around the use of APIs which allow different systems to connect through standard architecture. This technology can join together internal and external systems to automate processes and create efficiencies, removing the risk and expensive of manual interventions.
Yet many platforms still operate legacy websites with limited integration into the back-office, requiring advisers and providers to re-key data. And although other businesses have recently launched new digital front ends, not all processes are available online due to the lack of APIs in their back-office systems, resulting in a continued reliance on paper, email and phone calls. The demands on technical resource to implement continued regulatory change and product evolution, coupled with the ability for administrators within advice firms to find manual work-around solutions to the lack of joined up systems, has meant that integration has not been an urgent priority for many platforms.
However, the impact of Covid-19 and the need for businesses to quickly move operations to people’s homes, maybe the catalyst for change as platforms re-consider their operating models. Working remotely has been a major challenge for many platforms who have relied heavily on manual processes, posted documents, wet signatures and on-premises systems that cannot be accessed remotely. NextWealth research in May found that across 20 advised platforms, 42% of processes require a scanned original to be sent to the platform. Only one platform reviewed didn’t require a paper or scanned form with a client signature for at least one process.
While in normal times, dealing in paper documents and wet signatures can increase administration and cause delays, in a remote working environment, it creates a serious disruption to service. Time and time again we hear advisers saying they just want their platform to be easy to use and provide a good service across everything it claims to offer. The technology already exists to create online journeys straight through from the front office to the back-office across a broad range of online instructions, with easy integrations to other systems and tools. It should be a given that platforms allow advisers to work seamlessly across desktop, smartphone or tablet and perform actions and access information, client documents and tools as easily when they are on the road or at home as when they are in the office.
Unfortunately, all too often this is not the case. Adviser and client frustration over the lack of a full range of online journeys on platforms is not new, but the Coronavirus lockdown has really highlighted some of the inefficiencies within platform businesses. It is a wake-up call to platform senior managers, compelling them to urgently review operations and swiftly execute change to continue to win advisers hearts and minds.
The pandemic has forced us all to quickly adapt to new ways of working, with far greater reliance on online systems across all aspects of our lives. The industry was already evolving, but Covid-19 has undoubtedly provided a catalyst for faster change. In order to remain competitive and continue to drive margin for shareholders, platforms need to seize the opportunity to continue their digital transformation, reducing time spent on administration, creating efficiencies across the industry and improving service for the benefit of all.
Here at GBST everything we are developing is taking an API first approach making it easier for our clients and new prospects to offer a more integrated solution to drive the required efficiencies and therefore profits for our customers.