One of the key rules of the digital economy is that consumer expectations are set by their last good online experience. Millions of people thought a Blackberry was a smart phone until Steve Jobs came up with the iPhone. Where is the mighty Blackberry now?
All too often good ideas are too difficult, until someone works out a way to do it. Then all of a sudden it can become the new normal. Those who don’t adapt quickly can find market share in rapid decline. Such a moment has just happened in investment platforms and if workplace pension providers don’t act fast most are in line to have their Blackberry moment very soon.
Over the last 20 years investment platforms have transformed the UK individual long-term savings market. Most advisers now use platforms as the cornerstone of their clients’ long-term investing and retirement provision.
This is despite the fact that much of the functionality such platforms offer is at best limited. Other than providing the ability to hold multiple assets and product wrappers in a single environment they deliver little very real value, but provide an administrative tool that advisers can use to, at least partially, streamline their operating processes. In practice these are software functions which should really incur fixed costs, rather than ad valorem charges.
For many years advisers have been telling me they would prefer platform functionality they could access seamlessly from within the practice management systems which effectively form the core operating systems for their businesses. Indeed some firms like Foster Denovo have become so frustrated with the traditional platform market that they have actually built their own.
Last month as part of the introduction of its integrated Model Portfolio Service (iMPS) Intelliflo announced a degree of integration between its software, the most widely used of its type in the field with a 35 per cent market share, which delivers much of what advisers have asked for.
Intelliflo has delivered a way in which advisers can select very competitively priced model portfolios, identify any necessary rebalancing, generate the necessary client documentation, create a recommendation, issue this to the client, receive instructions using electronic signatures and then seamlessly initiate the rebalancing, on the platform, via an API.
While there will be many model portfolio providers, Invesco which acquired Intelliflo last year has set the scene by offering its own model portfolios priced at between 35 to 78bps for Growth series and 30 to 71bps for the Income series. Advisers pay a charge of £1 per client per month plus VAT but capped at a maximum of £70.
Now Intelliflo has identified a way of taking much of the operational pain away from advisers working with platforms it is ideally placed to deliver a similar transformation to workplace savings. At the same time Intelliflo also announced it is extending the Personal Finance Portal it deliver as a free component in its software to include an Open Banking service.
The member engagement functionality delivered by most workplace pension providers is pitiful when compared to what Intelliflo’s Personal Finance Portal offers at no extra cost to clients of their adviser customers. Significantly many of the largest corporate advice firms in the market have become Intelliflo customers in the last few years.
Presently the PFP functionality is not available to individual members of groups schemes but there is significant appetite amongst the firm’s corporate advice clients for it to be extended to include this. It is a very natural evolution and one I would expect to arrive sooner rather than later.
Invesco obviously has considerable expertise at providing fund ranges for some very large workplace pension schemes so extending iMPS into the workplace environment should also be a very natural change. All that is then needed is a low cost pension wrapper and contribution collection mechanism.
I am in no doubt that iMPS will have a dramatic impact on the individual platform market. It is easy to see how this could be extended into workplace pensions which could be great for advisers, employers and most importantly members. However, many of the largest workplace pension schemes may face a devastating loss of market share. Incumbent providers need to consider their response urgently or they could be seeing billions in assets walking out the door soon.