Waiting on the corporate platforms
By Pádraig Floyd - 18th February 2010I was going to offer a jaundiced squint at Hector Sants stepping down from his job as chief executive of the Financial Services Authority. After all, he – along with the Big Swell, Adair Turner, both investment bankers, mind – had the audacity to blame institutional investors for creating the environment that led to the credit crunch when the country was asking questions of the regulator they both represented.
But, you’re probably as bored with that as I am and he’s done his shift, done OK and is off to pastures new. Good luck to him.
Instead, I wanted to cover something I have been working on that there simply wasn’t space for in March's issue of Pensions Management: corporate platforms.
OK, so there’s a fair bit about platforms in that issue, but there is momentum growing that has the potential to radically alter the state of the market as a whole.
PM conducted a straw poll among consultants – large, medium and small – about platforms. First we asked whether the future for pensions provision in the UK rested on their shoulders. Almost half (49%) agreed, with only 13% disagreeing. Perhaps more relevant is the large number of those who have yet to make up their mind (38%).
As for the scope for platforms to deliver properly integrated benefits systems and allow the delivery of true flexible benefits, there was almost unanimous agreement (86%). Actually, no-one disagreed, but the remainder (14% for those of you who aren’t actuaries) weren’t sure.
Particularly interesting were perceptions as to whether there is an arms race on and we would see the drawing of battlelines between providers, fund managers and scheme advisers. Almost half (42%) agreed that this was the case, while 29% disagreed. The same proportion (29%) have yet to make their minds up, but it shows considerable numbers have already decided on the potential results.
Many consultants have told me that insurance companies competing in this space will look to deal direct with clients and ditch the adviser. So we asked, and surprise, surprise, the majority (62%) felt this was a very real possibility. Only a quarter (25%) disagreed, with only 13% unsure. Most platform provider have made it clear they are seeking to work with advisers, but the actions of some – despite recent denials – have set the cat among the pigeons.
Whatever distribution model companies decide upon, 86% of those polled believe the current client–adviser–provider relationship will change with the arrival of corporate platforms.
Finally, we asked whether platforms might struggle to gain traction as Nest would undermine all occupational arrangements leading to leveling down and half (50%) rejected this notion. This could be denial as much as positivity, but these guys speak to clients all the time, so that is an interesting – and encouraging – point of view.
The rest of the vote was split equally between those who agreed Nest would have such an impact and those who were unsure.
What can we learn from this? That platforms are coming, they are likely to determine the future of workplace savings and that they present equal parts of potential and risk to the advisory market.
Many advisers already know this, and are looking to build their own bomb. They’re as likely to be shaping the future of the industry as anyone else, but changes are coming and there is an extinction horizon looming. Make sure your advisers are going to be survivors.
There’s more on corporate platforms in the March issue, out at the beginning of the month.