Replatforming doens’t have to be a leap of faith
Suppose you ask an adviser about their willingness to replatform. You will likely be treated to spicy language because changing platforms is a high-effort and risk event with no immediate payback. It has the potential for unwanted client disturbance, and there is no equivalent to Open Banking Regulations to control the switch process or timeline. Unless the service from the existing platform provider is shocking and impacts the client's experience, inertia will maintain the status quo. The tide is now turning as functionality from new entrants matures and switch workbenches are entering the market. Aviva announced their solution in Money Marketing on May 9th with claims of a 40% reduction in adviser effort through automated workflows. Other providers have developed or are developing switch workbenches, which will make replatforming less of a high-stakes leap of faith. So, how do you choose if replatforming is right for you?
This article will focus on a 3-step approach to platform selection that avoids buying a “better mousetrap” by re-imagining what a modern platform ecosystem can offer and how it will support your firm to deliver more value.
Step 1 Postcard from the future. Take a day out of the office with your team and imagine how your business could operate without legacy platform constraints:
The vision: future ways of working and propositional changes.
How will customer needs, preferences, and engagement be enhanced and pain points reduced?
The actions required to get there (people, process, technology, compliance ..).
The key assumptions aligned with measurable business outcomes, and the leading indicators that can be used to validate (or not).
Typically, this is a one-day facilitated workshop with the approach borrowed from agile product and proposition development. It fosters a collaborative environment and allows big leap-of-faith ideas to be clarified and tested before making any significant investment. The true advantage, however, lies in the consensus built amongst participants. This leads to genuine enrolment in the vision of the future business, making each member feel valued and integral to the decision-making process.
Step 2 Develop the operating model and ways of working. Articulate the future state target operating model assuming technology and process constraints are removed, and routine repeatable tasks are eliminated or automated. Ask yourself the following questions:
How many clients could we support if we offered a compelling digital customer experience?
How many hours could our advisers spend on client-facing activities per week?
What routine activities must be eliminated or automated to free up capacity for value-adding client-facing activities?
How could this impact client lifetime value, engagement, and referrals?
Answering these questions leads to producing a first-cut financial model and business case. We recommend modelling two scenarios:
Adopting a third-party platform provider with an easy-to-use, highly integrated tech stack and an award-winning BDM support and service model. Think P1, 7IM, Parmenion, Fundment, et-al. Firms stay focused on serving clients and don’t need to take on additional permissions and responsibilities or increase headcount. Advice over admin.
Adopting a white-label solution and going down the Model B route with adviser-controlled platforms. This is more compelling for vertically integrated firms that have grown through acquisition and are left operating a long tail of legacy platforms. 10 plus is not uncommon, and up to 16 have been reported. Often, integration stops when assets and clients are transferred, but legacy platform rationalisation hasn’t because it was never considered viable or desirable.
Both are good choices as firms can protect their margin and create more client value. Option 1 is suited to firms that want increased efficiency without the burden of additional responsibilities and the cost of dedicated staff to support running the platform. Option 2 best suits firms that want more control over their services, working methods, charging structures, and client experience. This niche operating model has approximately 4% of advised platform assets on an adviser-controlled platform, but momentum is building as case studies from Atomos, Skerritts, and others build market confidence. Whether you opt for a third-party platform or an adviser-controlled platform, the next step is the same.
Step 3 define the selection criteria. Steps 1 and 2 establish the wider context, and now the selection criteria can be defined. Several tools and reports are available that can help.
Market Map by Woven Advice is my favorite free resource developed by Nicky Sevell and her team. It's designed to transform how advisers engage with the latest technology solutions in advice and wealth technology. This is the go-to place to start if you want to select a platform as part of an efficient ecosystem.
The Lang Cat Platform Analyser. This is a subscription-based service that provides a comparison of third-party platforms (currently white labelled platforms are excluded, shame) across a range of criteria, including:
The investment proposition.
Features and functionality.
Integration and technology.
Costs and charges.
Service and support.
User Experience.
The Platforum UK Adviser Platform Market Overview. Published annually, this charged report provides a high-level summary of the adviser platform market that includes:
Market overview. Size, AUM, flows.
Platform technology and developments, including where platforms need to improve.
Asset classes supported.
Adviser sentiment and performance sentiment, including likes and dislikes and advisers' wants and needs.
The Defacto Platform Service Review. An annual report that covers how satisfied the advisers are with their preferred platforms against key service categories and tracks how scores are changing year on year. It’s a free resource and an excellent service-focused summary.
A combination of desk-based research and questionnaires creates a shortlist of, say, three preferred suppliers to quantify the easy-to-define features and functionality, costs, etc. The next step is to hold face-to-face “show and tell” sessions to drill down on the more nuanced capabilities that will impact the long-term platform fit with your firm.
Ease of use for your staff and clients.
Service failures. Drill down on service levels by support channel, incident data by service failure types, volumes, impacts, and fault prevention measures to prevent reoccurrence.
Support model for platform operation and adoption, including asset switching, client communication and ongoing operation, roles and responsibilities, and user group feedback.
Process automation identifying manual exception handling processes, instances of “paper” based processes,
Technology: two-way integrations, data source of truth, APIs, ease and frequency of deploying upgrades, development roadmap, matched to available capacity.
The platform features advisers' most value is service and operational efficiency. This is followed by ease of use, eliminating admin tasks and failure points to reduce risks and free up time for customer-facing activities. Following these three steps will enable the decision to replatform to be made with greater rigour and confidence by:
Defining the context of the desired business model.
Clarifying future expectations, enabling assumptions to be tested and validated.
Expanding the selection criteria beyond the must-have features and functionality hygiene factors to include Integration, automation, data management, service, and support.
If you would like to explore how to implement the steps outlined, please get in touch. Our next article will explore the in-house skills and capabilities required to operate an adviser-controlled platform, including roles, division of responsibilities, and indicative team sizes.