One step forwards, two steps back
With outsourcing retaining its popularity in the growing platform market, there are just a few platforms using their own technology. Indeed, The Lang Cat, recently predicted that the number of platforms using proprietary technology will drop to just 15 per cent by 2020.
Paul Bagley, Director of Distribution & Adviser Marketing at James Hay, explains why using proprietary technology remains the sensible solution for platforms looking to avoid the pain of regular replatforming and remain responsive in an ever-changing market.
With replatforming horror stories commonplace, the fresh new starts promised, following technology upgrades, are yet to be enjoyed. Continuous technology upgrades are required throughout the life of a platform, both to enhance and develop their offering and to respond swiftly to changes in legislation and regulation, so many will end up in endless replatforming cycles – which cause disruption and confusion for advisers and their clients.
When outsourcing the core technology to a third-party provider, a platform is one of many requesting tweaks, changes and enhancements. Some developments can take so long to become a reality that by the time they have been completed, they may be out of date. What they end up with is what they wanted a couple of years previous and they are already pushing for the next upgrade – and so the loop continues. It’s frustrating for the platform but even more so for the many advisers and their clients using the platform.
On the other hand, proprietary technology means a platform has control over its own development It can build the tools and functionality its advisers and their clients want. Plus, it has control over the way it works, feeds into its systems and looks to the user. We take a modular approach at James Hay, adding propositional elements that can be used as and when needed by advisers. And we’re not alone, others have had success with similar models without the loss of scale or capability – a driver that is usually behind outsourcing technology in the first place.
What’s more, total control over our processes has meant we can adapt to market movements, for example, the increased number of advisers shunning the more traditional platform model and adopting hybrid solutions. A small proportion of our clients use us solely for the delivery of a pension wrapper for off-platform custody elsewhere. Whilst the majority continue to use us in the more traditional way, it would be remiss of us not to be positioned to support either approach, or new ones yet to be established.
Whichever way you look at it, technology plays a huge part in securing the future of a platform. However with news of continued replatforming issues and delays, or investors looking to cash out it would seem technology providers face the same ongoing battle to future proof themselves.
Nobody can predict the future with any real certainty. In the platform space, we need to be able to respond swiftly to advisers, regulators, investors, markets, politics and competition to name a few. We cannot predict what will happen with any of the main outsourced technology providers, but by using our own technology, at James Hay we can predict what we’ll be developing, how long it will take and when we can deliver it. Those who outsource cannot say the same with any real conviction.
This article first appeared in Financial Adviser