The last year has seen many prophecies about the future of platforms, and whether new entrants pose a threat to the existing platform model. Many predictions have focussed on the potential for adviser firms to utilise new technology to offer a platform service themselves, rather than rely on platform and technology providers. This, potentially disruptive model, usually has a lower fee model for the platform technology, allowing the platform provider to increase their margin, or passing on savings to customers (or both). So if this model is so attractive, are we seeing true disruption in this space? Does this pose a threat to the traditional platform model, and how are the larger incumbents reacting to this development? 

Consolidation & Vertical Integration 

One of the main driving forces towards a new version of the Platform market, often called Platform 3.0, is that we have seen, and continue to see, a large amount of M&A activity in this segment of the market. The larger advice firms are becoming larger to achieve economies of scale. This is particularly true when we consider the number of new regulations and costs that make operating as a smaller advice firm much harder to maintain.  

Equally, we see vertical integration between manufacturers and distributors protecting their revenue, particularly in tougher market conditions. There is also a growing number of advice firms taking advantage of new technology providers to become platform providers. Not only does this give the firms more control over their services, but lower fees from the technology providers allow them to increase their margin by retaining the fees for the additional services being provided. 

The question for this model is – will it stay as a significant, but smaller segment of the market, or will it become the norm – putting traditional larger platform providers, and their technology providers, under threat? What we have seen so far is, as with other challengers in the platform space over the last decade, scale is really difficult to achieve, and only when there is large enough scale does this model become attractive. It is possible that this model will only really work for a small section of the market that have the ability to scale to a sufficient level, leaving the traditional model in place for the rest of the market. 

Regulatory Requirements 

As ever, Consumer Duty dominates this discussion. When we look at what forces are truly creating a new landscape for platforms, the increased regulatory requirement is right up there. Many will be looking at the FCA’s recent interventions and if they didn’t realise this already, they’re probably understanding that this change is going to be meaningful and lasting. 

When we consider the ever increasing burden of complying with the relevant regulations like Consumer Duty, why, would a firm want to take on the additional burden of running a platform? Not only will they have to comply with their existing requirements as a distributor, but also consider the requirements as a manufacturer. This is the argument presented by many to say that this model, whilst viable for some of the larger adviser firms is just not going to be the right solution for the majority of the market. It is possible that given the additional requirement, new entrants may capture some of the market but not become the dominant in market.  

It’s true that the model is clearly attractive enough for some, and the prize of that extra margin has tempted enough for this conversation to be relevant. To create a new normal we also don’t need to see this become the dominant force. Influence of the larger players to change their model to compete is enough, some would argue we’re already seeing this happening. 


Even as costs have increased, and with a patchy period of net outflows for many, we are seeing platform charges decrease. This is clearly good for consumers, and is the sign of a healthy, competitive market. Equally, the FCA are holding firms to account for their charging practices, as we have recently seen with the ending of ‘double dipping’ on cash holdings. 

The new technology entrants are challenging the level of fees that should be levied of platform technology and are forcing the hand of some in the market to look at whether their fees are competitive, and whether they are offering fair value to customers.  

Now that the services and processes have largely become commoditised and automation becomes more prevalent, platform providers are going to have to justify where they are providing value, particularly where they are charging higher fees than competitors. Some are clearly looking at this equation and deciding that the fees have to come down. 


When we combine the fees being charged by new entrants with an attractive technology offering that puts the provider in control of the services provided, using microservices or modular components. Compare this to some of the challenges others have faced using the bigger technology providers, not only in terms of timescales and issues with re-platforming, but a lack of flexibility and high costs to adapt services, we can expect some are looking at what they’re getting and questioning if that is the right solution. The saving grace for many is the sunk costs and time taken to move to another provider, but tech firms will have to ensure they keep up and stay relevant in a market more focused on tech than ever before. On the flip side, these large technology companies do have the resources and market position to move with the market demand, and this is where it looks like the market will shift rapidly, where a tipping point, if it hasn’t been reached already, is very close. Technology providers will need to create a solution that has much greater integration, configuration and automation than has previously been achieved. 


The market response has been pretty clear so far, with fees being lowered and new technology from the major providers either already in production, or coming soon, the challenge from new entrants has been heard. The question is whether there is momentum for a large section of the market to move to a new model. Given the pace of change in the platform market tends to be relatively slow, it’s more likely that the major players in the market will be able to adapt to the new normal, whilst handing more control to advised firms to create the offering that they need, without many of the smaller and medium-sized firms to take on the additional burden of providing their own platform. Whilst the attraction of increased revenue will be realised by some of the larger advised firms, this model is not going to work for many. The fact we see the evolution happening is a sign of a fairly robust and competitive market that can adapt itself to different conditions. 

Dom House

Lead Consultant