Platform war moves to new battlegrounds
AnYONEwho knows anything about the business of financial services knows that master trust and wrap platforms have risen from almost nought a decade ago to become the dominant investment vehicle for retail investors.
The growth of the master trust/wrap sector as a whole, however, has also been accompanied by fierce competition among a growing number of providers.
It is interesting to step back and consider what the key competitive battlegrounds among these providers will be.
For a long time, it was the various features offered by different master trusts (seeMoney Management’sMaster Trust feature starting on p16), which were touted as their main point of competitive differentiation.
If your competitor’s master trust had 50 different investment choices, then it was important to have 100. If your competitor’s wrap account could report on direct property investments, it was important for your wrap to be able to report on investments in stamp collections.
However, much of that has been turned around this year with the launch of Colonial First State’s FirstChoice platform and ING’s launch of its OneAnswer master trust. Both Colonial and ING have since been preaching a back-to-basics approach in the master trust/wrap sector, arguing what investors really want is a cheap and simple investment platform, not untold choices.
The position taken by the two groups may mark the beginning in earnest of a new battleground within the master trust/wrap sector, where cost is the primary differentiator between platforms.
However, even this competitive trend may soon be left in the past. Already much is being said about the next generation of investment platforms, most notably separately managed accounts (SMAs).
It seems a week has not gone by since Asgard launched its SMA service in July without someone talking about how SMAs will be the next revolution in portfolio administration.
Despite this, only a few are saying we are seeing the arrival of the killer product, which will muscle out managed funds, master trusts and wrap accounts.
Who will be the winners is a matter for the bookies, but if you thought the turf war between and among master trusts and wraps was heating up, the arrival of SMAs will be further fuel for that fire.
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