The FCA is reportedly showing concerns over platform scalability, with rumours it is set to look at platform technology systems. David Howard asks if your platform can pass the scalability test…
I think the FCA is right to be concerned: the industry has already seen unprecedented inflows in recent years, with the migration of huge amounts of advised customers to platforms. Providers expect to see further growth to both advised and direct to consumer offerings following the changes in pension legislation which come into force next month. For many individuals, platforms are fast becoming home to the majority of their investments and retirement savings, so if the technology cannot cope with increased demand many people will suffer as a consequence.
Platforms are becoming an increasingly complex mix of functionality provided by different suppliers and these technology ecosystems surrounding the provision of investment services need to be considered when looking at how successfully one will cope with a large influx of new business. This includes the portal services that provide information and support research, planning and applications right through to document management.
For many, technology upgrades and even re-platforming are already underway or at least under consideration to improve efficiency and functionality through modern web-based systems. However, attempting to re-platform while providing a “business as usual" service at the same time is difficult. Doing it while dealing with unprecedented levels of demand from new and existing customers is close to impossible.
In an ideal world, a separate team would work on the new technology, overseeing the seamless integration of different systems, often from different internal and external suppliers, while the existing development team supports and enhances the current version. However, most platforms and technology providers do not have the resources to do that.
So what can be done? For platforms, the first thing is to understand where the scalability issues are and what their impact will be on the integrity and performance of the platform. To do this, the platform needs to be subjected to controlled workload testing to identify any drop off in performance at all points through the system.
Step two is about understanding what can be done to improve performance issues, which requires an active dialogue with the technology provider. Very rarely is there a single “silver bullet" but rather a series of interventions, throughout the platform architecture to ensure performance remains consistent as demand increases. Knowing where the performance bottlenecks lie and what can be done to remove them is the key to platform scalability.
For providers, this is a serious matter. A scalability and performance issue with one of their technology or service providers could lead to missed trades and errors that result in compliance issues. It is therefore essential providers are at the forefront of ensuring all suppliers in the platform ecosystem meet performance demands.
For advisers, questions about capacity and scalability should be asked as part of ongoing platform due diligence but we are moving into new territory in terms of demand and there are no previous benchmarks. It is difficult to predict how this will play out – hence the FCA’s concern – but having robust performance and service level agreements in place with your platform is a crucial step in ensuring clients are protected whatever happens.
This article was originally published on Money Marketing (free to register).