Where does Platform Due Diligence fit in the whole process?
PDD should be considered after PROD. The primary aim of carrying out regular PDD is to ensure the platform is suitable for your client bank, or a segment of. If you haven’t carried out a PROD exercise then it will be much trickier to pick out features that can benefit your clients. By segmenting first, this helps highlight which clients need what level of features and the direction of research for selecting a suitable platform.
What do we do with single providers?
Typically these will be covered by your Centralised Investment Proposition rather than falling under Platform Due Diligence if they are recommended with regularity; for instance, if you have an insured pension provider which takes priority over your platform when it comes to pension-only business.
On the other hand, if the single provider only offers a niche product you only recommend once in a while (i.e. a handful of offshore bond recommendations per year), then it can be covered with a bit of bespoke research per case rather than having the full due diligence process maintaining each year. It is better this way than bringing on a platform that offers on-platform bonds to cater for just a couple of clients with these types of plans.
Does back-end tech matter?
In short, yes, as this is the foundation on which the platform operates, and much of its functionality is derived from. Platforms can take two routes here – outsource to a third-party tech provider or develop their own technology – and both have their advantages.
By electing to outsource the technology component, platform providers can focus on the user experience with less worry over keeping on top of digital security and implementing regulatory changes. However, there are currently only three main third-party providers – FNZ, GBST and Bravura. The CMA recently (15th April 2021) blocked a merger between FNZ and GBST over concerns of a ‘substantial lessening of competition’. The fear is that as competition reduces, prices will rise, ultimately passed on to the end consumer.
By selecting a platform with its own back end technology, there is less concern for what goes on in this space, as well as the platform having total control over any feature changes (along with their associated costs) and how quickly they can be implemented. There is also less concern for a potentially disruptive re-platforming.
Should ‘financial strength’ be a major consideration?
Not many businesses are prepared to share detailed accounts of their turnover and profits, so there will always be some ambiguity in determining the true financial strength of a platform.
When considering the financial strength, it should generally be considered as a desirable factor rather than a deal-breaker! Not least because, as we discussed, many of the up-and-coming platforms won’t generally be profitable or have accumulated a high amount of AUM, or even have an AKG rating. In turn, this means a platform that has fantastic potential to integrate well with your business and has the potential to serve your client bank with the greatest efficiency could be cast aside for reasons that are unlikely to affect the end client.
If you missed the webinar, you can catch up here.