We arrived at the office today to confirmation of rumours that Old Mutual is being split into four to drive growth of the individual business units. At the same time Old Mutual Wealth announced results and the accompanying commentary struck me as refreshingly customer focussed.
OMW’s announcement of results began by emphasising that the business is focussed on delivering customer value and Paul Feeney (chief exec of OMW) is quoted: “By putting client needs at the heart of our business strategy, Old Mutual Wealth has transformed from a standalone platform into an award-winning, next generation wealth management business.”
We have declared 2016 the year of the customer and so applaud this focus from Old Mutual Wealth. While we often hear that customer centricity is good for business – making the necessary investment in technology and service can also be expensive.
Financial advisers tell us that the #1 reason to switch platforms is service
In our latest survey (to be published next week in our Adviser Platform Guide: Year in Review), financial advisers told us that the top reason to switch platforms is service. When we speak with advisers they define service as:
- Being able to reach someone when they pick up the phone
- Being given advance notice of any problems or changes that will affect their businesses
- Dealing with errors efficiently and with good grace
Tension in the middle
Advisers want automation and efficiency –that is why assets migrated so quickly to investment platforms. Platforms make an adviser’s job easier and allow them to keep costs lower for their customers.
And everyone wants platform pricing to come down. The mid-point of the adviser platform pricing has settled at around 35 bps and arguably only a small proportion of this fee goes to the tech costs. The rest goes to human intervention.
Therein lies the tension in the middle. Financial advisers value that human intervention but they also want to keep costs down. By placing too much value on that human intervention – financial advisers are doing their clients a disservice, driving up platform fees.
Balance: when it just works
The trick for platforms is to find the sweet spot where it just works. Striking a balance between cost and efficiency and offering the necessary human intervention when necessary.
Investment in the future – but what about today?
Our data suggest that there are £136bn of assets in flight. This is money that is moving from one tech infrastructure to another – in most cases from a proprietary technology to an outsourced third party.
Nearly one third of adviser platform assets are changing technology provider. In many cases this is badly needed investment to modernise and to offer functionality to future proof the businesses.
But, when a platform is changing to a new backbone technology, there is no investment in where they are – only investment in where they are going. Investments in existing systems drop off a cliff with no money put into maintenance or running costs.
This is a tough line to walk for platforms. It is being addressed through rigorous segmentation efforts and investment in the front-end to allow advisers to self-serve. But for financial advisers they are often left holding the baby – frustrated that systems aren’t working and it can be hard to get someone on the phone.
Investment to ease the transition
While live support can be costly, it can sometimes make sense to invest during a period of transition. We saw this in the workplace market in the roll out of auto-enrolment. Employers, financial advisers and consultants praised Royal London’s service levels to support the transition to AE. Contrast that with other providers who had pushed a self-serve model and were in some cases given scathing reviews.
But the bottom line is whether this model is sustainable. Our view is that investment is needed to ease a transition – in a mixture of self-service tools and live support.
We will continue to watch the flow of assets to see if those that do get higher scores for service get a disproportionate share of the spoils.
Platforum are expanding. We are currently recruiting for three key positions within the team:
- Senior Researcher – qualitative researcher working across all Platforum reports
- Research Associate – working across Platforum reports including the UK Adviser Guide
- Account Manager – focus on new business activity and client acquisition to strengthen results by using a subscription sales approach