Advice industry caught between competing forces of fragmentation and consolidation as tech ramps up
5 Jul, 2023

Daryll Welsh, Head of Product, Ninety One Investment Platform


In the ever-evolving landscape of financial advice, investment platforms have emerged as key players helping to revolutionise the industry. The dispensing of financial advice to investors has come a long way over the last 25 years, more or less the same time that platforms first started to appear on the scene.


Investment platforms have allowed advisors to scale their businesses by consolidating client investments and providing the tools and processes to help advisors run their practices more efficiently. From client onboarding and account management to document processing and compliance, platforms have significantly reduced administrative burdens, allowing advisors to focus more on client-centric activities.


The broader industry has also moved on, with many new technology providers entering the fray: consider customer relationship management, financial needs analysis, risk profiling, workflow and reporting tools. On the investment side we’ve seen the shift from specialist mandates (remember financial and industrial funds?) to multi-asset funds, the introduction of discretionary funds managers (DFMs) and in many cases, a return to the building block approach and the use of more specialist instruments such as hedge funds and alternatives.


More recently, the industry has seen a significant new wave of technological change. Firstly, Covid helped to accelerate the adoption of ‘digital everything’ and a step-change move away from paper forms, in-person meetings and wet signatures. This also introduced a slew of new advicetech providers to the advice world, allowing advisors far greater choice in implementing a digital strategy. Secondly, consolidation in the platform space has picked up as un-profitable platforms and those owned by groups who are unwilling to invest sufficiently to keep them competitive, look to combine with others to build scale. Scale, however, only brings benefits when combined with the necessary investment in technology.


Platforms are tech-hungry businesses, and this comes with a hefty price tag. One way to achieve a return on this investment is through scale, either through acquisition or organic growth. The other way to protect margin is through efficiency, which has resulted in an uptick in re-platforming (change in the tech stack) to help automate as many of the remaining manual processes as possible and to futureproof the platform.


Where does that leave us today? Our view is that the industry finds itself at an interesting point with two conflicting driving forces. On the one hand, platforms are trying to encourage advisors to consolidate client investments. Intuitively one could argue that this makes sense for both the advisor and the platform; advisors benefit by having more in one place, platforms in turn benefit through the scale it achieves.


On the other hand, digitisation and advicetech technologies encourage fragmentation of service as advisors choose different systems to do different jobs. We don’t necessarily believe it’s a case of one or the other but rather how the different parties work together to create an ecosystem that ultimately leads to client benefit.


Key to the resolution of this tug-of-war between centralisation of custody and fragmentation of advicetech however, sits a key success factor currently being neglected: access to high-quality, integrated investor data. It is rather ironic that the data piece is largely being overlooked as responsible, open-architecture data systems are key to the success of both strategies.


A new ecosystem emerges


The existing ecosystem comprising advisors, clients, and platforms functions reasonably well when an advisor exclusively utilises a single platform and the client’s assets are consolidated within that platform. However, such circumstances are uncommon, since clients typically have investments with various providers and own products not administered by the platform. Consequently, advisors are now turning to software providers to assist in managing client’s diverse investments and provide a consolidated view of their assets.


At the core of this process lies the consolidation of data, enabling advisors to leverage this information for analysis and reporting. However, without tighter integration between platforms and advicetech providers, achieving this unified view is proving problematic.


We believe platforms will need to broaden their service offerings and embrace the integration of advicetech providers into their operating environment. By improving connectivity with advicetech providers, platforms can stay ahead of the curve and effectively meet the evolving needs of advisors and clients alike. This proactive approach will help platforms enhance their value proposition and deliver comprehensive financial advisory services that truly empower advisors to cater to the diverse requirements of their clients.


At Ninety One Investment Platform (IP), we’ve started to take the steps to make this a reality, by building a cloud-based data store that in time will be accessible to third parties via API. By embracing the integration of advicetech providers, Ninety One IP is establishing itself as a trusted central hub for financial advisors, offering a comprehensive suite of tools and technologies that streamline operations, drive efficiency, and unlock new opportunities for growth and success.





@Daryll Welsh
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