There comes a point in every adviser business' development that they start to question whether the technology they are using is still fit for purpose.
While advisers we hear from are always busy, especially as a result of pension reforms, we also hear gripes about the way they are using the technology at their disposal, particularly in the platform space.
Particularly prevalent among the large or fast-growing firms we speak with, is a growing sense that they are now at a tipping point when it comes to the technology they use, with a number of common pitfalls emerging.
There are four main areas regularly and consistently highlighted in and around the platform or investment administration space. Some of you may only recognise one of these problems; others, all of them, but it is rare that we speak to any firm not experiencing one of the following.
Problem 1: We require a lower cost platform solution that recognises our scale and ability to put our own proposition together.
The platform industry has been engaged in a functionality arms race, which neither enables efficiency nor serves firms – especially larger firms – well.
For example, some (not all) traditional platforms have spent considerable sums developing on-platform planning and reporting tools, yet the vast majority of adviser firms use independent tools for risk profiling and planning as part of their practice management systems.
Extra kit isn't translating to extra value – and vitally, isn't saving your firm any money on software licences.
Problem 2: We need tighter integration from our front office to middle to back, to become more efficient and reduce operational risk.
As you either grapple with scale already achieved, or move towards greater scale, you start to resemble a product provider in your own right. That is to say, you need greater control of your client and user experience (front office), control functions and quality assurance (middle) and operational processes (back). All three need to move in lockstep; something that the retail platform sector is simply not set up to do.
The practice management system is business critical for virtually all adviser firms, and should be the central record keeping hub for all client and business activities; however, with a few exceptions the level of integration between BOS and platforms is, to put it politely, basic. It's remarkable that your administrators are still rekeying data in 2017.
This lack of integration impacts both front and back office adviser functions, but all of this is solvable, as long as you are not reliant on a platform that also has to worry about serving the needs of potentially hundreds of smaller firms at the same time.
Problem 3: We need to build underlying value in our business and ensure we are in control of the outcomes our clients experience.
Advisory firms that have reached scale are faced with a choice if they want to build value and create additional revenue streams. They can partner and vertically integrate with a provider or build out from their own advice proposition themselves. Either way, the goal here is that the firm can generate additional revenue and still provide a more cost-effective and compelling service to their clients.
This is particularly important when you may be seeking funding or even an IPO in future. Creating something with genuine distinction in a market where potential clients – and investors – struggle to distinguish one firm from another is completely central. Yes, recognising revenue streams from becoming a platform operator is useful, but what's really important is creating and delivering a consistent and stand-out client proposition.
Problem 4: We need different services for different parts of our client book, without destroying efficiency or introducing risk.
Increasingly, firms need to increase the number and type of clients they are able to serve. Not all clients, however, want or need full advice. This can be especially problematic if you have grown your client bank through acquisition, and have a large number of "orphaned" clients you need to re-engage with.
It is certainly not the case that a full-fat financial planning service will be right for all clients. Whether the alternative is a phone or Skype-based service, robo-advice, a direct offering or a hybrid is up to you. But what is certainly true is that from an operational standpoint – whether you are building value, driving it or maximising it – you can't afford to create a new proposition that doesn't mesh well with your existing one. It's the hallmark of a well-run, risk-adverse business, and exactly what both the regulator and potential future investors are looking for.
Download the full report: Level Up: Business Growth, Platforms and You (PDF)