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Partner Insight: Freedom of Movement - the Platform market in 2020

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Posted In: Wealth Management Administration
Published: 04/03/2020

We’re only a couple of months into 2020 but one clear theme is already emerging for platforms – more movement of assets around the market. Kevin Okell, Managing Director at Altus explores this trend and discusses what we can expect for the rest of the year.

 

We’re only a couple of months into 2020 but one clear theme is already emerging for platforms – more movement of assets around the market. As a leading supplier of transfer technology, Altus saw a 34% growth in volumes in the last quarter and we expect that trend to continue through 2020 driven by a combination of regulation and market consolidation.

On the regulatory front, the obvious catalyst is PS19/29 which flows directly from the FCA’s Investment Platforms Market Study (IPMS). This policy statement focuses entirely on the free movement of assets between platforms and specifically the thorny problem of conversions between share classes. Ever since RDR, the number of share classes in popular funds has risen steadily as platforms compete to negotiate better distribution deals. One unfortunate consequence has been the inability to transfer units in-specie between platforms with clients having to sell on one platform then buy on another. That creates a disincentive to switching platforms – something the FCA is keen to tackle.

In PS19/29 the FCA ruled that platforms must support conversions between unit classes from July 31st, as well as reminding fund managers of their existing regulatory obligations on the same subject. Fortunately for the industry, the FCA has been flagging this issue for some time and technology standards to enable electronic conversions are now in place thanks to TeX and the open transfer standards. Many platforms are already planning the necessary changes to their systems and most anticipate significantly more electronic transfers as a result, especially as the FCA has made clear the rules apply to all units in investment funds whatever the tax wrapper.

Meanwhile, as everyone in the platform sector will have noticed, the industry is consolidating. It started a couple of years ago with the acquisition of Elevate by Standard Life followed by Aegon buying Cofunds. More recently Embark has acquired the retail advisory platforms of ATS and Zurich and now it would seem that Ascentric is up for sale too. In the direct sector, Interactive has been busy integrating TD Direct, then ATS and now it is set to acquire The Share Centre. Add to this the continued success of BPO Platform providers – notably FNZ with some very big deals but also SEI, Pershing, Allfunds and Hubwise, and it is clear that a lot of assets are continuing to change hands.

Dealing with a constant swirl of asset transfers is no longer an exceptional situation and is quickly becoming the new normal. Organisations who can transfer assets swiftly and efficiently both for individual clients and in bulk will have a competitive advantage in the future as platforms compete and more books of business move around. Naturally, great technology is required to power that capability but, just as important, are the people and processes that connect the technology. We are now working collaboratively with firms who regard the movement of assets as more than an operational overhead which needs to be done at the lowest cost. Those firms are beginning to market their ability to move assets as a core part of their proposition and using this to attract new business – thousands of holdings are now being regularly moved in bulk migrations.

So maybe freedom of movement won’t end with Brexit after all!

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