When platform IT begins to creak
Does your platform have scalable technology? This should now be a key due diligence question asked by adviser firms, says Nucleus’s Barry Neilson
I was recently asked what the biggest emerging issue in the platform space is this year. Until recently, the main focus in the platform market, like most of the financial services industry, has been regulatory change. But a bigger, more pressing, topic has been emerging: technology strain. All savvy platform providers should now be looking at the underlying technologies utilised by their platforms and considering whether they can scale to deal with the increasing number of clients they service. The need to innovate functionality at a rate which keeps pace with the demand of their users is also now paramount.
The reason for this is simple: as advisory businesses continue to widen and deepen their client propositions, their expectations about the role that platforms will play in the delivery of their client service becomes ever greater. The need to accelerate change is being driven by increasingly diverse user demands, and rightly so. It is important to be one step ahead of the game; the most important thing for advisers, after all, is being able to give the customer what they want and they are increasingly less likely to tolerate working with platforms that constrain the delivery of their desired client outcomes.
So increased client demands ultimately result in there being a greater pressure on platforms to perform. These demands are vital in ensuring that the market remains innovative and vibrant, but it will inevitably result in a polarisation of the market: who will the winners and losers be? Platform providers will have to continually innovate to stay relevant.
Historically most platforms key function has been to enable a client’s assets to be consolidated in a single place, with functionality geared around the transacting and reporting of a client’s portfolio. Whilst this may be a key activity that the adviser executes on behalf of the client, there are likely to be many other elements to the service provided. Currently, most of these will be standalone activities but, in the future, will be increasingly likely to be executed via the platform. It is therefore necessary for platforms to ensure they have the correct technology in place to support this ongoing activity.
Right now, platforms face an interesting decision: should they focus on the traditional but increasingly commoditised, lower margin activity of asset transacting and reporting; or significantly widen out their proposition to include a fuller range of the activities advisers carry out in the delivery of their overall client proposition? Ultimately, it comes down to whether a platform wishes to define itself as a simple asset aggregation service or to strive to be the key element of infrastructure within an advisory business. The more forward thinking platform providers will inevitably say the latter – but to turn this desire into reality may require them to consider how scalable their current technology is.
A number of platform providers may find that the IT systems they are currently using are starting to creak. The level of data stored within a platform database will probably increase exponentially as new clients are added, funds are switched, distributions are processed and will, in time, run the risk of impacting the platform’s performance and usability. In these instances, a ‘reboot’ is the only sensible option and this may involve ripping out the existing technology infrastructure and moving to an entirely new technology provider as a number of platforms plan to do. This has the potential not to be the most straightforward process. And the question is, is it still possible to provide a good level of service whilst vital changes take place, or will clients suffer?
The technology that a platform utilises is also a key due diligence point which advisers must consider fully. The onus is now on advisers to check that systems are working as they should be, which is why it is so important
to understand the fundamental challenges in the technology space. Our White Paper earlier this year laid out how advisers could go about addressing the more onerous due diligence requirements in the quickest and most efficient way, managing the risk of client detriment as much as possible and ensuring that the platform you use helps, rather than hinders, your business.
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