Adviser 'platform fatigue' stifles AUA growth in Q1

Platform assets under administration (AUA) only rose by 3.62% in Q1 as advisers' fears grew about the regulatory impact of using the technology, according to research by The Platforum.

The consultancy found AUA only increased from £146.29bn to £151.58bn across the sector with expensive features also dampening adviser enthusiasm.

Wrap platforms had the greatest percentage increase in AUA but from a low base with Wealthtime recording a massive 80% rise to £0.18bn.

Avalon's AUM was up 36.84% to £0.26bn while Novia and Elevate also gained momentum, up 29.63% and 25% respectively to £0.70bn and £2.50bn by the end of the period.

It was a different story for the Aviva Wrap with zero growth in AUA in Q1 and assets sitting at just £0.58bn by the end of March. The insurer failed to attract advisers to the wrap after the failure of its previous Lifetime proposition and recently announced it would be integrating the wrap with its E-commerce platform.

Meanwhile, AUA growth was largely static for the big three platform providers. FundsNetwork's AUA was up 3.13% to £36.20bn, Cofunds posted a 1.81% rise to £30.90bn while Skandia is still the largest with AUA of £39.67bn after a 1.12% increase.

The Platforum managing director Holly Mackay said: "These relatively flat figures cannot be blamed on market movements, as the FTSE recovered by the close of March to remain largely static for the quarter. This increase of just £5.29bn in the last quarter really surprised us."

She said adviser confusion about how platforms fitted with their post-RDR business model was a major drag on growth.

"IFAs are like deers in the headlights of the RDR juggernaut - unsure which way to turn - and we detect some platform fatigue. Momentum has slowed across the board.

"Advisers are taking exams, restructuring their businesses and working out how to charge fees. Add to that the recent FSA paper about suitability which has just increased fears about using single provider or platform tools and I think we have a more serious problem in the platform market than anyone thinks.

"Platforms have not listened to what IFAs really want their role to be and expensive features are turning IFAs off.

"We think there will be second generation platforms evolving with more of a focus on adviser software and - we hate to say it - there will be more focus on costs which could lead to the dreaded 'wrap-of-wrap' model emerging where it's all about price, not service."