It may seem hard to believe now, but investment platforms were rare beasts around a quarter of a century ago. Today there are so many that the adviser community is increasingly concerned that some might not survive.
According to a recent survey, nearly 50% of advisers fear a platform will fail within the next three years. Meanwhile, 40% believe the market is “oversupplied” – a polite way of saying there are simply too many[1].
They may have a point. We are witnessing a story that eventually plays out in every commercial arena. Success attracts competition, and competition brings an array of consequences – not all of them positive.
On the plus side, a crowded marketplace can lower costs and fuel innovation. On the minus side, it can also expose stakeholders to suboptimal products and services and condemn underperformers to history.
It is only natural that some participants should exit a market, of course. Such is the nature of business. Yet the prospect of a platform collapsing is undoubtedly alarming, given everything that such an event might entail.
It is therefore vital that advisers – and, by extension, their clients – choose carefully. In doing so, it is important to consider not just the obvious areas in which some platforms struggle but also, crucially, the less obvious areas in which others quietly excel.
Manifest weaknesses
There are arguably three areas in which platforms face especially difficult challenges. They are interconnected, at least to a degree, in so far as each ultimately boils down to a question of resources.
The first is financial strength. This is the principal source of advisers’ growing unease. It is in many ways the foundation on which a platform is built and the basis of the trust that must be generated among stakeholders.
The second is technology, which is manifestly at the heart of every platform’s offering. The fight to stay at the cutting edge is becoming ever more intense, with outmoded systems and software now frequently the subject of fierce criticism[2].
What is sometimes overlooked, though, is the threat posed by tech that is too far ahead of the curve. The “state of the art” is likely to be useful – not to mention safe – only if it has been fully tested in a real-world environment.
Finally, keeping pace with regulation can be hugely demanding. The level of scrutiny experienced by platforms in 2024 was widely deemed so elevated that an industry body, the Platforms Association, was formed to provide “a dedicated forum and representative voice”[3].
It is essential to note that regulation is almost invariably geared towards ensuring better outcomes for investors. Yet the administrative burden imposed can be monumental, particularly in the absence of a sizeable team with the required expertise.
Underappreciated strengths
A platform that is able to tick the above boxes is likely to constitute an attractive proposition. But there are other, less appreciated factors that could be well worth looking out for.
The first links back to technology. It can be unhelpful to think of tech as the be-all and end-all, because our industry remains fundamentally rooted in direct engagement and strong relationships.
This is why Truly Independent believes the way forward lies in combining the respective capabilities of machines and humans in a “best of both worlds” approach. It is also why we are wary of platforms that conspicuously remove humans from the loop.
Along similar lines, we feel the most effective way for a platform to pursue a policy of continuous enhancement is to actively involve the stakeholders whose needs it aims to serve. “Co-creation”, as it is known, can be a powerful tool for giving advisers and clients what they really want.
Another concept that is central to our ethos is the idea of financial advice for all. Platforms clearly have a major part to play in this regard, as they act as a potent means of democratising access to a wide range of financial products and services.
However, they can genuinely contribute to this goal only if they are simple to use, absolutely transparent and fully accountable. Many portray themselves as such, but it is always worth digging deeper to establish whether their claims are justified.
Katie Brinsden is Managing Director of Truly Independent.
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[1] See, for example, Scottish Widows: “Recognising risks in the platform market”, December 2024 – https://platform.scottishwidows.co.uk/campaign/investor-confidence-barometer/2024/recognising-risks-in-the-platform-market/.
[2] See, for example, Equisoft: Transforming Investment Management: The Rise and Risks of Model Portfolio Services, 2024 – https://www.equisoft.com/insights/investment/transforming-investment-management-the-rise-and-risks-of-model-portfolio-services.
[3] See, for example, Pensions Age: “New membership body for investment platforms industry launches”, September 24 2024 – https://www.pensionsage.com/pa/New-membership-body-for-investment-platforms-industry-launches.php.
