Blog: On this day in…

David Ferguson, CEO of Nucleus Financial, wonders whether 31 March will go down as a key date in the history of platforms…

There have been a number of interesting days in the (nearly) five years since Nucleus began its journey. One such day that particularly springs to mind is 26 October 2007.

For those of you with other things to obsess about, that was the day Standard Life failed in its bid to acquire Resolution and the day on which Royal London acquired Ascentric, thus taking the previously-independent wrap into traditional life company ownership.

Since that rather dramatic Friday three and half years ago, several new participants have entered the platform market. It has become increasingly apparent (to this observer at least) that once we are over the RDR threshold, wrap platforms are going to dominate the retail financial services sector.

I specifically say wrap platforms as I cannot see any way in which independent financial advisers can constrain their clients’ investment choice and limit their control over their own business by running their operation on a fund supermarket. There will be no place for packaged investment/pension products, other than in extreme niche sectors.

I’ve been particularly interested by how many legacy life assurers have failed to visibly respond to this rather imminent and massive market shift. While some may have been active behind the scenes, others have been actively in denial, believing the old commission-led packaged product world might somehow reinvent itself as a non-commission-led packaged product world.

We just never saw that as a possibility – things have simply moved on too much over the past few years. After all, niches aside, it isn’t terribly often that markets revert to historic behaviour. Sure, retro can be cool and some 1970s stuff is terribly chic, but I can’t imagine anyone ever finding any funk in an investment bond bearing establishment units and a surrender penalty.

So the recent news that the newly re-energised (and previously platform fence-sitting) Aegon UK has partnered with Novia is of serious note. Not only has one of the biggest legacy insurers finally woken up and acted upon what is going on, but one of the last remaining independent platforms has (apparently) diversified its corporate model to deliver third-party administration services.

Time will tell who has the most to gain from this deal. In the meantime, I congratulate both parties on an innovative deal while also pondering whether Novia will effectively be competing headlong with its new customer. While I know this can work well in some sectors we aren’t exactly talking Google Maps on Apple’s iPhone here!

I await with interest more detail about the competitive differential, but for now it seems that Aegon’s angle is expertise in the ‘at-retirement market’ as if this is some kind of new-found market segment. This message also carries an inference that current market participants are purely working in the asset accumulation space.

I can’t speak for others such as Transact, Ascentric or Standard Life, but at the time of writing around 11.5% of Nucleus assets are in income drawdown and many other clients are taking regular withdrawals from their portfolios. ‘At retirement’ is just a lifestage and one which most IFAs are very comfortably already using existing platforms to navigate.

In any event (although it’s maybe too much to expect), I do hope Aegon will commit properly to a proposition and a pricing strategy that is (a) straightforward and (b) more transparent than some of the other life company-owned platforms. I also mischievously wonder if they’ll be invited to join the ranks of the UK Platform Group.

As ever, time will tell. For now I’ll log 31 March 2011 beneath 26 October 2007 in my list of key dates which represent milestones in the long-overdue cleansing and democratisation of UK retail financial services.