It’s been just over a year since I joined Money Marketing and while I still have a lot to learn, I’m certainly more familiar with the term platform now.
When our editor Justin first told me about the platform space, I’m pretty sure I smiled and nodded as if I knew what he was talking about. I had no idea and he knew it too, but we carried on.
As I will have said to many industry people, for me a platform was where I would start my train journey from. That now seems like a distant memory having not required a season ticket for quite some months.
People have been very patient with me and have taken the time to help me get my head around adviser platforms. I know I still have a way to go. It’s been comforting to hear industry stalwarts tell me that if I’ve managed to even get a definition of a platform then I am doing better than them. I know they’re just being nice, but it still speaks to a certain truth about the sector.
At some point in my journey it dawned on me that there are so many services which are considered a platform. From LinkedIn and Facebook to exercise and hotel booking apps – ‘platform’ seems to be an easy catch-all term.
Platforms in the financial services world have proved a fascinating subject matter. I admit at first, I wasn’t convinced it would be. Sorry!
In the past year, while I have been getting to grips with platforms, there have been a few notable changes in the space. No doubt there will be more to come, particularly when it comes to consolidation.
The platform consolidation race
Deal rumours in the platform sector seem nothing new, but, as the saying goes there’s rarely smoke without fire.
A murmur here, a murmur there and then suddenly a roar of activity. I saw it with the Zurich platform’s sale to Embark, and then again with Ascentric and M&G. Before my time, there were countless other examples where market chatter turned out to be right on the nose.
The platforms themselves will rarely say much about “market speculation”. Sometimes the speculation will genuinely amount to nothing. At others, the record shows it was more than just idle gossip.
Which platforms are creating a stir currently? What noises could result in an eventual deal?
If you haven’t seen Justin’s recent exclusive story about private equity dons Anacap looking to swoop on Tatton-linked platform Amber, just months after they bought Wealthtime than you should definitely have a read of that.
Anacap will be an unfamiliar name to many advisers. But other household names seem to crop up time and time again.
Speculation runs rife over future of Ascentric platform
James Hay and Novia?
Could a potential deal be struck between James Hay and Novia? Back in August last year (while I was on holiday – typical) the FCA gave the go ahead for London private equity firm Epiris to acquire James Hay’s parent company IFG Group.
Private equity firms are certainly starting to see the value of adviser platforms. And they are looking to make more acquisitions, so we hear.
We’re still waiting to see if Anacap’s purchase of small adviser platform Wealthtime gets the go ahead, but sources say that’s just one symbol of a wider intent from PE houses more generally. Anacap considered buying Ascentric before M&G went in for it, sources have told us.
Money Marketing revealed plans of the Wealthtime deal in February. Yes, 2020 has been a long year and we still have five months to go.
Wealthtime platform lines up private equity deal
It if gets the green light it will mark Anacap’s first foray in the UK platform industry. And as we now know Amber could be a close second.
But back to James Hay. It hasn’t always been smooth sailing for the Sipp provider come platform. With a new parent company more money may be available to iron out the creases. Or a better option might be to buy another platform which has the functions it requires already in place.
Could Novia be the perfect fit for James Hay? Novia is often touted as a platform considering a deal. On a few occasions when I have spoken to Novia chief executive Bill Vasilieff he has told me the firm gets approached on an almost daily basis. Word has it that some discussions in the past have progressed to formal stages like due diligence and exclusivity agreements.
He also says the company is still keen to float, although he admits it’s not quite at that stage yet.
Industry sources suggest he has been looking for a sale but debates over an appropriate price point continue.
In the current market could Novia be more amenable to a lower offer? And did Epiris even want the James Hay platform or was the company mainly interested in the advice business Saunderson House?
Other deals have shown a buyer may have only wanted an aspect of the business and decide to offload other parts at the first opportunity. For example, Interactive Investor ditched the intermediary platform of Alliance Trust Savings to allow the firm to focus on the direct to consumer market soon after its purchase.
The £6bn adviser platform was snapped up by Embark, which then went on to purchase the Zurich platform.
While Altus platforms director Ben Hammond says he can’t be sure if Epiris would be looking to get rid of James Hay, he adds: “There is only so much you can find out before you buy a company but then you take a strategic look at it. If you decide you have ended up with two or three parts of a business and only one part fits what you are trying to do you will look to offload the other parts.”
He also highlights that talks of a potential Novia sale “have been knocking around for years”.
“Novia has indicated it’s not looking to sell to a private company or another platform as such, but to sell to the market instead and do something more like what Nucleus, Transact or AJ Bell have done,” he says. “For them it’s all around scale.”
The highs and lows of advice market IPOs
But that’s not to say buyers wouldn’t be interested in a smaller platform, Hammond suggests, as Anacap’s purchase of Wealthtime is testament to.
“Wealthtime has about £2bn assets under administration. It is relatively small but is quite niche as well, so I guess every platform has got something going for them in some way.”
Loyal following
How would advisers feel if Novia was snapped up by a rival? It’s no industry secret that Novia has a loyal adviser base.
Hammond says: “It’s a pretty efficient business, it’s on modern tech and they do a lot of stuff themselves like the front end on top of the Composer stuff.”
Could the current coronavirus crisis put paid to talks of another platform deal or at least slow it down?
If the Ascentric sale is anything to go by then then such activity may happen quicker than the “normal” pre-Covid world we lived in.
Ascentric sale paves way for digital-first acquisitions
Other platforms also have a dedicated fan base, but the complexity of James Hay’s offering could potentially sway it to purchase a platform with a simpler structure and the right technology to help put its own system in better shape.
An industry source told me they have it on good authority that James Hay and Novia are talking and could be getting close to a deal.
They believe such a transaction would make sense as the amount of work it will take for James Hay to “get its platform right” is likely to cost significantly more.
The problems are thought to have arisen as James Hay moved away from its purely Sipp-based background and opted to bolt on other functions “cheap and cheerfully”, which don’t all link together.
Under the previous parent company there wasn’t much money in the pot to make improvements, sources say.
Buying Novia and then transferring the James Hay platform across could be a quicker, cheaper and more reliable fix.
Novia is a well-desired platform which has most of the capabilities James Hay would be interested in. Ascentric is thought to have been another platform James Hay had in mind.
I’m eagerly waiting to see if the whispers start getting louder.
All aboard. The next train departing will be from platform…
Katey
What all publications seemed to ignore was the Share CEntre, recently merged with Interactive Investor. What sets them apart from the usual suspects is the fact that they charge a very reasonable flat fee that really saves a considerable amount over traditional platforms that still charge by percentages. The flat fee is for portfolios of any size. It doesn’t alter. Obviously the bigger the portfolio, the more you save. For example an ISA portfolio costs £60 per YEAR and a share account (non-ISA holdings) costs £24 per YEAR. There are dealing charges based on two tariffs. Standard and Frequent, but you are hardly likely to pay more then 1% per deal. Unless you trade like a Dervish you will still be miles ahead of traditional platforms.
I have always wondered why they never appeared in all the lists and surveys, but I have my suspicions.
This industry works in the same way as a pair of lungs..
You see my point is…when you inhale the life giving air fills our lungs and all is good with the world ….the opposite effect is when you exhale !
Now in normal times you inhale and exhale with Swiss watch timing and all is good with the world.
All is functioning as it should be.
At present (and for sometime now) we are constantly being winded (i’m sure you may know how that feels ?) so we find ourselves gasping for air only to partially recover then BANG !!! gasping again
People like companies start to fold and or amalgamate, platforms are no different when starved of air time after time after time….
Platforms are throwing in the towel and merging, just like companies (some 300 a year for the past 5 years)
Will it all end in just one super company and one super platform …. ?
I’m not as convinced as the regulator seems to be, size, strength, and turnover is their preferred choice as it makes their job easy, stable and very profitable.