By Vanessa Stoykov and Marcus Field
As appeared in MasterFunds Quarterly September 2007 issue
There has been talk for many years about consolidation in the platform space.
And yes, there has been a considerable reduction in numbers - and most predict this will continue.
The more interesting future play in the platform space is the evolving nature of the platforms themselves.
While traditionally seen by many as an administration and investment vehicles, some of the biggest platforms are gearing up to be so much more.
It’s said that whoever owns the relationship with the end user in
financial services is the ultimate winner. And this has certainly been
true in the funds management space, with product manufacturers being
squeezed on fees by those with distribution.
This rule can also be applied to the relationships that platforms have
with both the adviser, and ultimately, the consumer.
We are already seeing platform giants such as MLC consider moving the
relationship with the adviser beyond administration and investment
services. In a recent interview for the evolution media Mastermind Series,
MLC’s CEO Steve Tucker said he was considering linking the front-end
advice business for the planner to the platform.
Tucker also saw the not-too-distant future holding the possibility of
retail banking available on platforms, and end consumers being able to own
their own transactions.
These types of plans will totally change the way platforms consider
their brand, relationships and marketing programs.
At present there is very little brand presence at consumer level on
platforms. Only Colonial First State has made any real attempt from a
consumer perspective to create a brand around its platform.
However, with consumer-driven functionality being considered for
platform giants, we may see the emergence of another brand war, such as we
have seen in the superannuation industry over the past two years.
And this will be no easy challenge. Creating an awareness, trust and
relationship with the consumer in the financial services space is
tough.
In a recent consumer trend report, Forrester Research indicates that
consumers are more mistrustful, insecure and hands-on than ever before
when making decisions around financial providers.
Adding another seemingly new service provider to the mix may only serve
to add to the complexity of choice for the consumer. This will not be an
easy relationship to forge and one that will take long-term brand
engagement.
Though platforms have yet to significantly flex their muscles in the
consumer space, the bigger ones still exert enormous influence in the
wealth management industry itself.
BT Wrap is now taking $1 billion in funds under administration every
eight weeks. CEO Rob Coombe said this was only set to grow. And he
predicted it was a function of this type of demand that would lead to
further consolidation.
The maintenance costs of a platform with this kind of capacity are
enormous. Coombe said the sheer cost of the maintenance alone - $20
million to $30 million a year - would mean only those with scale would
survive.
And real relationships were also the key to BT’s future success. More
than 6000 planners use BT Wrap. So Coombe predicted the future growth of
the platform would not come from signing up more planners. Instead, it
would be through strengthening the relationships with existing planners
and creating more funds flow from these relationships.
It will be interesting to see how platforms evolve over the next five
years and what type of relationship they make a claim on.
When evolution interviewed Skandia CEO Ross Laidlaw, he said enhanced
investment capacity at low cost would be the basis of its growth in the
adviser community. Skandia’s acquisition of InTech last year was a clear
indication to the market that Skandia was committed. Laidlaw said this
would not be the end of acquisitions for the organisation. The big
challenge for Skandia will be to increase the strength and numbers of its
relationships with planners.
And its sponsorship of racing yacht Skandia in the Sydney-to-Hobart
race may serve as a useful tool from a brand recognition level as
platforms start to attract more mainstream focus.
One thing is for sure over the next few years. The conversation around
platforms will be broadening from issues such as STP and administration
efficiency.
The issue of relationships will be looked at with new eyes, and not
just from the sales teams. Instead, executive management, marketing and
PR, IT and even HR will engage in new techniques, campaigns, and
strategies to win hearts and minds.
*Vanessa Stoykov is CEO and Marcus Field is Senior Marketing Manager
of evolution media.