The platform market has neatly divided itself into two segments — with providers such as Asgard, BT and Navigator in one group, and the other made up of a variety of smaller players.
The large end of the market shares the major dealer groups, while the small platform providers are picking boutique dealer groups and breakaway groups of advisers. Thanks to about $2 billion of superannuation monies flowing in every month, most platforms are achieving growth, although it has not been at the spectacular levels of five years ago.
BT national manager wrap distribution Mitchell Sinclair says larger dealer groups account for 80 per cent of the wrap business. All of this business has been secured by the large wrap players; BT alone has 48 badged versions of its wrap with adviser groups.
Maintaining market share
So, how do these providers protect their business?
As the research opposite shows, even the largest players are not guaranteed the growth that will automatically class them as the superstars of the platform industry.
Sinclair says service is the key.
“Advisers are looking for reliability and excellent service as well as value in the offering,” he says.
“You have to make sure you are aligned with platform delivery expected by the adviser and that has to be an open relationship.”
Mitchell admits there are fewer opportunities at the bigger end to persuade large dealer groups to switch platforms.
Macquarie Adviser Services head of product and marketing Matthew Rady says its platform has $14 billion funds under administration so it is a target for the smaller competitors.
“One of the challenges for us and other large providers is maintaining the level of competitive services,” he says.
“The level of complexity and products, range of reporting and the transitional capability are all issues.”
Rady says advisers want flexibility from their platform provider.
“The bigger players have the flexibility to accommodate any type of business,” he says.
Adviser loyalty
Another hurdle for moving people away from their existing platform is that the adviser’s business is firmly linked to the platform.
“Many of our long-term users have traded in a particular way and have built their business around the platform,” Rady says.
“Dealers get comfortable with the platform; they understand and find it comfortable to work with. It is hard to move clients away from a platform they are comfortable with and this has resulted in fewer opportunities to take advisers away.”
One opportunity of winning advisers to a new platform is if they have had a bad experience with their existing provider, but that is not a guaranteed reason for moving.
“Advisers become entrenched, even when they experience poor levels of performance,” Rady says.
“We don’t take that lightly and nor do we provide leading platform servers in the market with an opportunity.”
Aviva chief operating officer Grant Salmon says service levels are a key factor for the group’s Navigator master trust.
“We have benchmarks levels of service and we set them above what the customer expects,” he says. “We listen a lot to what the adviser wants, for example, we invest a lot in adviser desktop technology.”
Salmon admits it is hard for advisers to walk away from their platform because of the technology spend.
“It is interesting what makes advisers move from one platform to another, but you can’t assume advisers won’t move,” he says.
“Smaller platform players will find disgruntled advisers, but we do try and build strong relationships with dealers and their advisers.”
Choice of platform
AXA head of platforms David Frost says he is surprised at the extent of market opportunities for winning new business for the Summit platform.
“Some of the big dealer groups have an in-house platform, but there is still a lot of opportunity to use multiple platforms,” he says.
“There are still opportunities to be on approved list of platforms,” Frost says.
“We have seen more transition as advisers move from one platform to another.”
But Frost says any transitions have to be dealt with promptly to retain the business.
“We tend to do it fairly quickly as the more quickly you move, the more chance you have of retaining the business,” he says.
Another way of boosting a platform’s funds under administration is to buy dealer groups with platforms — which is what AXA did with ipac.
Frost says this will lead to the transition of a dealer group’s advisers onto the primary platform, but it does take time, and he accepts that most major dealer groups have cemented their platform decisions, which makes transition of business harder.
“Alternatively, other ways of boosting funds under administration is by helping the advisers with their clients through leveraging some of the capability in the platform,” he says.
“As the adviser grows, you get the flow-on benefits.”
Finding new business
Being close to the adviser is one of the weapons the smaller platform players have to win business in a competitive world.
IOOF Investment Management head of product Andrew Polson agrees the platform market is very competitive.
“It is difficult to win new mandates, as most dealer groups have three or four platforms,” he says.
“We can only make inroads on technical points, as greenfield growth is non-existent.”
IOOF runs two platforms — Lifetrack and IOOF Portfolio Services — and has about $7 billion funds under administration.
Polson says the two platforms are being integrated and now work on the same system.
“Eventually there will be one platform, but we are trying to make them look like each other at present,” he says.
“We are looking for growing platforms through an integrated strategy and functionality.”
Polson says as fee-for-service takes hold it creates opportunities for the smaller players.
“There will be opportunities to unbundle revenue streams and to align with dealer groups managing a holistic service.”
Polson says revenues that will be collected can be shared with the dealer group, although the platform provider still has to retain some earnings for product development and administration.
“Our success is the success of our dealer groups,” he says.
The other opportunity for smaller platform providers is breakaway dealer groups. Polson says IOOF is targeting these as they emerge because trying to win big dealer groups is almost a non-starter.
“The opportunities with the big dealer groups have gone. If they want to change it will be price-related and we can’t compete,” he says.
“There is aggressive price-cutting at the top end and if people just take price, middle-sized players will struggle.”
New entrants
Despite the Australian platform market being crowded, new players join every year.
Skandia entered the Australian market four years ago, although it has operated in 20 markets around the globe for a number of years.
CEO Ross Laidlaw says the aim is to deliver a platform that makes the adviser’s life easier, while delivering a low-cost solution, which Skandia can do by leveraging off its global client base.
“We are focusing on our strength, which is the separation of advice and product, and bringing that to the local market.”
Laidlaw says Skandia started by winning boutique dealer groups to its platform, but in recent times it has been attracting some larger dealer groups.
“We are also winning business through accountant-based dealer groups that like our independent approach,” he says.
Australian Unity general manager investments David Bryant says the smaller end of the platform market tends to produce a commodity product, but pays more attention to the needs of advisers.
“Smaller dealer groups have some special needs, but don’t need to pay for all that technology — so that creates an opportunity for us,” he says.
Industry consolidation
A few years ago there were predictions that the platform industry would be subject to considerable rationalisation. It hasn’t happened.
Frost believes in the long term some smaller players may join the big platforms, but that depends on where these smaller players are in the value chain.
“It will be increasingly difficult for some smaller players to stay in the space,” he says.
“Some entrepreneurial types of people running platforms have a limited ability to develop the platform, but will grow the platform to a certain size and sell it to a bigger player.”
Bryant says the small end of the market is the growth area for platforms and that rationalisation is inevitable at some stage.
“Most advisers have two or three platforms so there has been the need for rationalisation of the market,” he says.
“That may be a turning point for some platform providers that will lead to rationalisation.”
Frost says moves such as licensing superannuation trustees could lead to some rationalisation of platforms.
But with about $2 billion of new superannuation money floating around each month, there are still plenty of organic growth opportunities for most platform providers in the market. Rationalisation may be some way off yet.
