Platform M&A activity doesn’t have the greatest impact on adviser behaviour – not immediately at least. Advisers will of course take notice, but there isn’t a red flag instantly halting all business to a platform just because it is being sold or merged. Such news will likely trigger an ad hoc round of platform due diligence.
Ad hoc reviews are often event driven; this typically centres around (potential) M&A activity or other concerns such a technology migrations or issues with financial stability. But many view these events as the nature of the market and don’t expect to move clients all over the place as a result.
Just under a third of advisers tell us that ongoing M&A activity is among the top five reasons behind transferring a client off a platform. But this is far less important than service, functionality, usability and charges.
The real impact of M&A activity is felt in the long term:
- Business from new clients will start to be directed onto alternative platforms, should service levels drop or advisers consider other platforms to be more suitable.
- Existing business tends to be much stickier. Existing clients will be dealt with on a case-by-case basis at annual reviews and the barrier to switch can be very high.
- New assets from old clients are likely to continue to flow onto the old platform. This of course brings up issues of suitability and whether a transfer might be in the best interests of the client.
Certainty and continuation of service is key for advisers when it comes to platform sales. The short term effect may well see existing clients continued to be serviced where they are. But preferences are likely to change if standards slip, with new clients being placed elsewhere.
We are covering elements of platform selection, how advisers are segmenting platforms, platform switching and more in our next UK Adviser Platforms report being published next week. Find out more about our UK Adviser Platforms research here.