RDR: Can platform providers face another year of the same old problems?
One year after the Retail Distribution Review (RDR) came into force for platforms, Nathan Travell (pictured) product manager at Milestone Group explains why automation is needed to help platform providers move out of the red and into the black.
Assets under administration are going through the roof but top line profits remain under pressure. It’s a familiar challenge for platform providers, but it’s one that has been starkly inflated by the introduction of RDR.
RDR and the introduction of new share ‘clean’ classes has led to even more funds coming onto providers’ platforms. According to a recent report by the Fundscape Platform, platforms saw £42bn in net sales over the course of last year – a 16 per cent increase on the previous year. This growth has come in large part from financial advisers, who now represent 80 per cent of new business on platforms.
On top of this, margins have been squeezed by RDR. With all platforms now having to make explicit charges to their clients for the platform service, competition in platform pricing has increased, adding further pressure to the bottom line. And no provider wants to manage more assets for no return. In order to reduce bottom line costs and increase profits, a fundamental change is needed.
Change is never easy. And for many years platforms have focused on the client experience – understandably, given the nature of their business. Unfortunately, this has left some of the less glamorous administration functions somewhat neglected. For example, when it comes to processing income distributions, providers have had numerous people toiling away in the back office, chasing down that all important income voucher and payment, usually via Excel spreadsheets. But as assets have increased, so too have the number of people crunching the data, increasing cost, and the potential for error.
Automation is required to ease the pressure. From holding and maintaining the income diary for all share classes and monitoring for the receipt of income vouchers, to managing rebates quickly and accurately at the lowest possible cost, the technology now exists to reduce manual processes and the inherent risk and cost. Platform providers should embrace automation in these areas to ensure they can capitalise on their record inflows, as they can ill-afford to be in the same position a year from now.