Platforms are facing an increasing number of challenges in the future. The number of Platform companies in the UK has increased from 7 in 2003 to over 30 companies in 2013. Competition has intensified rapidly in the past decade, in terms of both the service offering and value proposition.
In 2011, the total aggregate revenue for the top 20 adviser Platforms was £710m, up from 330m in 2006. However, total expenses grew from £365m to £760m over the same period. This indicates the net £35m loss incurred in 2006 has increased to a net £50m loss in 2011. The challenges associated with the increase in competition combined with an increase in costs already experienced will be further compounded by the population demographics.
The UK faces the retirement of the baby boom generation. This generation has enjoyed the wealth which enabled them to invest in products provided by Platforms, both Supermarkets and Wraps. In many instances, this has driven sales away from the traditional Life and Pension product providers. Over the years, consumers have accumulated increased wealth, which has contributed to the success of the Platform market.
As this generation enters retirement, assets are being moved from Platforms into “at-retirement” decumulation products, provided by at-retirement solution providers. This will cause momentous asset drain for the Platforms, potentially forcing consolidation within the industry and endangering the future of several Platforms completely.
Platforms face losing billions of pounds of Assets Under Administration (AUA) due to not being able to service the retirement income sector sufficiently. Platforms’ current focus lies in managing the accumulation phase of the investment journey and their expertise in building and maintaining relationships with their customers. This expertise can also be used to retain the assets for a longer period of time by maintaining the relationship through the “at-retirement” phase.
Platforms that survive will be the companies that can quickly adapt to the changing market demands. They will offer new products and services to different segments for different life events, presenting a flexible proposition reflecting customer demand.
Exaxe can facilitate the retention of assets under administration by enabling Platforms to offer at-retirement products to their existing client base, thus increasing revenue and profitability.
Explore Exaxe Solutions and learn how we can help you adapt to the changing market demands.