Finance Monthly April 2020 Edition

bracket, and looking to further grow both organically and through acquisitions. The consolidation onto a single platform (powered by Hubwise) is pivotal for all these firms in being able to quickly and efficiently scale their businesses to £5billion of AUA and higher. Technology innovation, agile delivery, a digital-first mindset and online user experience which combines both ease of use and sophistication, are just some of the characteristics valued by each of these customers. How do you see the role of the platform evolving? Since the advent of the Retail Distribution Review (RDR) at the end of 2012, the role of a platform has been open for debate. Vertically integrated platforms recommending investments and product solutions would naturally be distributors – however smaller platforms like Hubwise are merely enablers – we have most of the same funds available but we don’t take a role in the provision of investment advice – we only act to execute the trades, settle the trades, safeguard client money and custody the assets – we ‘stick to our knitting’. It’s our customers (DFMs and advisers) that make these investment decisions – obviously looking at the fallout from recent events, it has struck us as very odd that some other platforms, especially D2C (execution-only) platforms, can command a healthy discount from Fund Managers which enables them to keep much higher fees. This practice must surely come under regulatory scrutiny soon. We are a firm believer in activity- based pricing, however, the market has yet to embrace this concept – but it is only a matter of time. We have a fully transparent policy with regard to pricing for the platform service – we charge 15 basis points (bps) to consolidators or ‘platform operators’, while for larger institutions it is 8–12bps. As we grow, our margins will only increase as we have the most efficient, purpose-built processing engine in the market (by some distance), therefore we can leverage on this and reduce our pricing as we grow, putting further pressure on the rest of the market. Those platforms that have just floated have no scope to reduce pricing as they have institutional shareholders who expect a return, so to stay competitive, they will need to offer new products, services and enhancements to technology. Those platforms who have just been acquired will not be able to see economies of scale for some time, and will also not be able to offer any improvements to products or tech as they will be resource-constrained and if they are not, will be heading for a regulatory encounter of the first kind. Most of the current platforms (advised and D2C) utilise third-party technology solutions (Bravura, FNZ, GBST and JHC), as well as third- party custodians or administrators (Pershing, SEI, Genpact). Where one or two major players do have some skin in the game with their own technology, it is so old and bespoke that it only fits their niche business and is not suitable to be rolled out to other market participants. Some new entrants have recently tried to enter the market and are being bought before they can establish a foothold or develop comparable functionality. Our AUM-based platform fee is competitive and combined with our monthly wrapper cap, makes us such good value that we are able to be the ‘Platform for Platforms’. You need to own and control the core technology. Only then can you build a platform fit-for-purpose, without inefficiencies, compromises and functionality gaps and when combined with the team’s deep understanding of the securities market structure, creates a real opportunity to do things differently, to see things differently. INVESTMENT - WRAP PLATFORMS 54 www.finance-monthly.com