The past 12 months have unquestionably been dominated by Covid-19, but within the platform space, developments unrelated to the pandemic could have both short and long-term implications for the sector.
M&A has been a recurring theme over the past few years, with many industry experts and commentators predicting a spike in activity. Recently such forecasts have started to materialise, across both advised platforms and the companies producing the technology that powers them.
Let’s start by recapping what’s been going on.
Embark announced at the end of 2019 that it was purchasing Alliance Trust Savings’ advised platform business, with Zurich added to its ranks shortly afterwards.
Anacap Financial has been particularly busy in the past 12 months, snapping up Wealthtime, Amber and most recently, Novia. And this could just be the start, with the private equity firm saying it will continue to eye-up further acquisitions.
Towards the latter part of last year, Nucleus announced it was up for sale with – according to news reports – no shortage of potential suitors. In early December, it was confirmed Transact’s parent company, Integrafin, and Epiris, the private equity holder of James Hay, had both made cash offers. However, the former has since withdrawn, leaving Epiris as the sole runner. It was reported that private equity house Aquiline Capital Partners and fund distribution platform, Allfunds, also submitted proposals.
Finally, Standard Life Aberdeen has put Parmenion up for sale as part of plans to streamline its adviser offering.
FNZ’s long-running purchase of GBST to create a platform tech giant was blocked by the Competition and Markets Authority (CMA) in August 2020 due to concerns over a substantial lessening of competition in the platform market. The CMA raised fears that this may lead to higher prices and fewer options for consumers and stifle innovation. The CMA has since ordered FNZ to sell GBST, a decision FNZ has appealed.
Such prominent M&A activity may stoke fears of other platforms or tech providers changing hands, causing potential disruption for both advisers and their clients. The question ‘which platform will be next?’ is not an unreasonable one.
Adviser concerns about the impact replatforming exercises may have on their businesses have plenty of merit. A cursory glance at the recent past reveals various firms either merging or undertaking technology upgrades encountering issues, with substantial costs to resolve them.
Examples include clients being locked out of their accounts for extended periods and unable to transact, especially problematic for those looking to make withdrawals or advisers not being paid their fees for prolonged periods. We’re sure lessons have been learnt, and many of the problems experienced won’t be repeated. But the potential for disruption, in an already turbulent period, remains high.
…and some reassurance
As such, we feel it’s important to allay any fears here. While further M&A activity is inevitable, Praemium is not up for sale – we are fully focused on our own growth story.
It’s important to note that we are in a different place to many other platforms. One of the key things that sets us apart in the advised platform market is that we own our technology.
This means our clients will not be disrupted by future tech firm mergers. It also gives us greater control over the improvements we make to better meet the needs of advisers in a fast-changing world. These improvements often come from working closely with our clients, listening to their needs to uncover any ‘pain points’. Building partnerships with our clients helps us target features and capabilities pertinent to their individual business. It also means we are more agile around regulatory changes and market demands.
We have no doubt everyone will be hoping the coming 12 months will be less challenging than 2020 proved to be. There will however be bumps in the road – our technology can help to smooth them out as we continue to travel together.