Business Growth, Platforms And
Total Page:16
File Type:pdf, Size:1020Kb
LEVEL UP: BUSINESS GROWTH, PLATFORMS AND YOU WELCOME What you’re about to read is an exploration of how new models are emerging to give high-growth financial planning and advisory firms more control of technology in general, and platforms in particular. We’ve been commissioned to write this by SEI, who (it may not surprise you to learn) supplies one of these new models. Now, SEI is not a charity, and it clearly hopes that executives of firms reading this will consider its services in future. That’s between SEI and you. For our part, we set out ground rules with SEI as we produced this document. We don’t accept editorial interference; we don’t allow clients to soften what we have to say, and we don’t allow them to tilt anything to knock rivals. SEI behaved impeccably throughout this project, and what you see here is our view. For what it’s worth, we have publicly stated on several occasions that we believe some of the most exciting propositions out there – the deep two- way integration between Fusion Wealth and Enable, say, or True Potential’s Wealth Platform– have links into SEI. It works differently to other platforms, and in common with all platforms has areas of strength and weakness. The lang cat’s house view, then, is that propositions of this type (you will see similar offerings from IFDL, Pershing and others) have great potential to really shake up the platform space for firms who are ready to make the leap. We’re pleased to be able to take these views out for a walk courtesy of SEI. LEVEL UP: BUSINESS GROWTH, PLATFORMS AND YOU // March 2017 // 3 A NEW WAY OF WORKING, A NEW WAY OF THINKING Firms we spoke to as part of our research for this paper are looking at how they can grow their businesses – “If you always do what you’ve whether organically or by acquisition – and develop always done, you will always and in some cases simplify their propositions in order get what you’ve always got” to industrialise their operations, realise economies of scale, and ensure they continue to deliver great customer outcomes for years to come. Easy to say. Hard to do. As with many famous aphorisms, no-one really agrees who Technology is inevitably at the heart of any business said this. Some reckon it’s Albert Einstein. Others plump improvement process, but until recently that same tech has for Henry Ford or Mark Twain. For our purposes, it doesn’t constrained the ways in which you can operate. Product really matter – what matters is the sentiment. If you want providers – and we include the retail platforms in this – to change an end result, you need to change the way you can deliver a wide range of propositions and services, do things. but they all require you to make a leap of faith and trust them to deliver the service and outcomes required on your We’re willing to bet a crisp £10 note that none of these behalf. For some firms, abdicating control of their own, notable men were thinking about the technological and their client’s destiny is increasingly unpalatable. This underpinnings of wealth management or financial planning is particularly acute if you’re engaged in brand-building for firms when they made this statement. But the fact is a larger organization – how can you possibly outsource the that for most it’s hugely relevant, and is a necessary if brand experience your clients will interact with most often? sometimes inconvenient consideration when planning your strategy for the years ahead. Tech improvements by themselves don’t do much of anything. New implementations must always go hand And that’s what this paper is about. There is no shortage of in hand with process improvements. Combined, these providers excitedly offering you variations on the same theme. can make your enterprise more efficient, win you more But, as we’ll see, the status quo isn’t working for many firms clients, and reduce your risks. With the FCA increasingly who have either achieved scale or who have it in their sights. interested in fast-growth firms including consolidators, now is the time to have all the controls in place. The good news is that what was once the preserve of the very largest firms with many billions under advice is Nonetheless, it’s time that enterprise or institutional firms becoming more and more accessible. More control is can enjoy the same level of control over their platform available to you, if you want it and are happy to work for it. proposition that they can over investments. There is no We’ll explain, and explore in the coming pages. reason in this day and age why that shouldn’t happen, and it’s remarkable that it hasn’t happened sooner. Institutional When we speak with advisers there are several common platforms, where you are the platform operator and so characteristics shared by almost all firms. Firstly, you’re can control both the experience and the price, are your busy. Advice is now the product, and the demand (and quickest mechanism to achieving this. need) for your service has never been greater. Secondly, the last 5 years or so have been a bit of a blur. The seismic So let’s explore how you can make this happen, and gain changes brought on by RDR and pension freedoms have more control over your end-to-end client proposition. taken time to embed, but now there appears to be light We’re not saying it’s easy – but it is more possible now at the end of the tunnel – assuming it’s not an onrushing than it’s ever been. MiFID II train. 4 // LEVEL UP: BUSINESS GROWTH, PLATFORMS AND YOU // March 2017 IS THIS PAPER RELEVANT FOR YOU? Many of the issues we’ll explore in this paper are universal – and everyone is always welcome to read the lang cat’s output. However, if you fit into one of the following three categories (and yes, we know you are special and can’t be so easily compartmentalised) then you may find it especially relevant: VALUE BUILDERS VALUE DRIVERS VALUE MAXIMISERS We class you as a ‘value builder’ You’re a step further on from the There’s nothing we can tell you if your firm is growing fast. You’re value builders – which isn’t to say about running a big firm – you are probably at or around £500m of you’ve got it all nailed. Your firm is already seasoned in operating in assets under administration (AUA), at or around £1bn of AUA, probably an enterprise environment, with but on track to double that or more as a result of prior acquisitions or all its attendant challenges. The in the next five years. You’re likely historical M&A activity. You’ve most issue for you is how to maximise to be operating in multiple areas, likely got great recurring income the enterprise value of the estate have discretionary permissions, already, but you’re not achieving you’ve already built. At your and on the lookout for firms to the return on capital and economies size – which might be £3-5bn acquire. You’re keen to avoid of scale you expected. As you of assets under management or building in inefficiency as you look to the future – perhaps you more – the industry should be grow, and above all need to make are a consolidator or considering bending over backwards to supply sure the business is in great shape becoming one – you need to your requirements with bespoke, for the next stage of your growth get your processes, costs and enterprise-level propositions – not trajectory. risks under control to become an the retail experience that a 10- attractive investment case in future. man band enjoys. It’s all about risk control, margin, and running a tight ship as you consolidate your position and think about future sources of funding, including an IPO. All of these categories share a drive to scale and grapple with similar things – the need for ownership, risk management, margin capture and control. These are things that simply aren’t available to the retail adviser firm. Let’s look at some of the attendant problems and consider where we might go next. LEVEL UP: BUSINESS GROWTH, PLATFORMS AND YOU // March 2017 // 5 THE PROBLEMS FACING ADVISER FIRMS An increasing number of large or fast-growing firms we speak with feel they are at a tipping point. Time and again we hear how busy they are, especially as a result of pension reform – but this doesn’t mean everything in the garden is rosy. We hear four main areas highlighted consistently in and around the platform or investment administration space; we’ll run through each in turn now. Some of you may only recognise one of these problems, others all of them, but it is rare that we speak to any firm for whom at least one of the following isn’t an itch that needs scratching. PROBLEM 1 PROBLEM 2 We require a lower cost We need tighter integration platform solution which from our front office to recognises our scale and middle and back, to become our ability to put our own more efficient and reduce proposition together. operational risk. PROBLEM 3 PROBLEM 4 We need to build underlying We need different services value in our business and for different parts of ensure we are in control of our client book, without the outcomes our clients destroying efficiency or experience.