The commercial necessity to adapt is rarely acknowledged in the good times, but environmental change has been thrust upon the platform species.
The need to adapt to the changing environment is unlikely to be brand new information to those steeped in the platform market who equally know that change is hard, particularly when the conversation turns to re-platforming and technology upgrades.
The crocodile has acute senses, able to detect the slightest disturbance or vibration and possesses excellent hearing, a sense that platforms may need to evolve to survive.
The demand for better service and the integration of core systems continues from advisers, and while integrations come with many complexities, platforms may need to attune their hearing to the demands of the market and deliver.
Of course, what you hear and what you can do about it are not always aligned, as the crocodile that ended up as handbag will posthumously testify to.
These demands are directed at a commoditised, low margin market that finds itself under further pressures to reduce cost rather than invest and innovate, and which is already beset by mandatory change.
What we have seen is some of these demands being met by new species of platform with integration and higher levels of automation built on top of more modern technology that also permits greater propositional flexibility. Can the new breed become the dominant species due to its advantages in its environment?
Darwinism can be misconstrued as suggesting the ‘strongest’ survive, rather than the most adaptable. The original platforms cannot stand in crocodile shoes, but financial services is not nature, and it is remiss to suggest that size and scale do not count in our industry, particularly in revenue and cash flow.
The platforms that survive will be those with large moats, principally through strong intermediary relationships, trust and service delivery. They, along with others, will need to continue reducing their cost base, targeting around 10bps, while finding the scope to deliver the new capabilities the environment demands to survive.
I predict we will see consolidation as the platform’s natural habitat goes into decline. In the fight for increasingly scarce resources (asset growth), the largest and strongest may win out.
If an established name was to fail, the challenge will be who would be prepared to not only take on the book and a complex migration, but the responsibility for the outcomes under consumer duty.
Jonathan Warren is head of innovation at Altus Consulting
