Richard Budnyj argues that, amidst all the talk about the death of platforms, selective platform migration is the only way forward.
The recent focus on the premature death of platforms has resulted in several articles that have been provocative, but have not addressed asset migration as the most likely way to achieve consolidation. With rumours of multiple platforms up for sale at prices that are reportedly low to attract bidders, the ambitious platforms will find consolidation and migration very attractive. It seems to us that retail-only platforms who have had tens or hundreds of millions invested in them either need to consolidate to get scale or withdraw as their parents are losing patience.
Platform migration is not for the faint hearted and, while it’s inherently complex and fraught with difficulty, taking a business rather than a technology-led approach will significantly increase the chances for success. The advantage of migrating the existing platform books like Cofunds, for example, is that they are predominantly ISA and GIA with almost no complex legacy pension products and sticky features. If you are in the position of running a high-quality platform that is cost-effective, with a multi-channel proposition and access to other parts of the value chain such as asset management, then achieving greater economies of scale and gaining the opportunity to cross-sell starts to look like a like a winning strategy.
So how would you go about it?
Assuming the due diligence stacked up and the price paid took into account the leakage of assets that would occur throughout the move, then the next steps are:
Step 1: Understand the agency data and segment the book by advised firms and non-advised customers (put orphans in this bucket). Sort the adviser books by size and product type.
Step 2: Identify and segment plans (accounts) into complexity categories. Don’t let the really complex determine what you do for the majority.
Step 3: Communicate plans to advisers and clients at the earliest opportunity. Manage expectations. There will be issues, but there shouldn’t be surprises.
Step 4: Focus on getting data as clean as possible and keep on top of it.
Step 5: Pilot with a friendly adviser firm.
Step 6: Implement in phased batches that the business and advisers can support.
Successful migration is all about data and communication. Understanding it, segmenting and preparing it will make the migration straightforward. Anyone who has successfully migrated a large book (these are a rarity – more people have done a moonwalk) will tell you it’s not so much a technology challenge, but more a business challenge. It doesn’t have to be difficult and it doesn’t have to be painful. You just need to approach it in the right way. We can state all this with confidence having successfully led migration of the Skandia Multi-fund book onto the Selestia (Old Mutual) platform. Taking a business-led approach, around 350,000 accounts phased over six months from pilot to completion were successfully migrated with a non-material loss of business and minimal disruption to the adviser community.
So, for those showing an interest in those flirting with or overtly up for sale, or for others that need to re-platform, selective migration is the only viable way forward. While it will never be a walk in the park, the new platform will gain scale and the old one gets to realise some value from the hard-won asset base.
For further information on our experience and approach to platform migration, why not get in touch?