Platform consolidation may see just 5 major players

The upper end of the Australian investment platform market faces consolidation notwithstanding new entrants.

Seven platforms currently make up the top end of the platform market and that number may well reduce to five.

That is the bottom line of discussion at Financial Newswire’s Advice, Wealth and Super Conference in the Hunter Valley with HUB 24’s Director, Strategic Development, Jason Entwistle acknowledging that while there would be new entrants, he did not believe they would threaten the current top seven.

He said that, currently, there was HUB24 and Netwealth and then the five platforms owned by the institutions and he believed that there would be fewer than those five platforms in five years’ time.

At the same time, Fiducian’s Business Development Manager, Platform Distribution, Robbie Koorey warned against a race to the bottom on platform fees stating that “if you’re going to cut the fee, you’re going to cut the service”.

The seven platforms regarded as making up the top end of the market are HUB24, Netwealth, BT Panorama, CFS Edge, Macquarie Wrap, AMP North and the Insignia platforms.

But while Fiducian’s Koorey warned against a race to the bottom on fees, citing experience in the United Kingdom, AMP North Group Executive, Platforms, Edwina Maloney said price was important.

“Being front-booked on price is important. You have to be in the market on price,” she said.

For his part, BT Panorama’s Michael Lowndes pointed to the complexity of consolidation, referencing the work around folding BT Wrap into Panorama.

However, Koorey said that he had noted a shift in focus towards costs and he believed a lot of platforms were following industry funds by focusing on cost and noted the UK experience where a fee war had driven some to become almost unprofitable.

“I hope that is not what happening here,” he said. “For us, it’s the last thing advisers are asking – what they want is services, functionality and flexibility.”

However, HUB24’s Entwistle said he believed consolidation would occur amongst the top seven funds, noting that in the US “there are three monster platforms which are the core capability that everyone relies on”.

“Literally, all of us playing the space, are subject to investment bankers coming in and saying ‘its not going to be seven, its going to be four’ and that things will look very different,” he said.

“But I think it will be of huge benefit to the industry because consolidation will generate scale which will inject fee, investment and service benefits,” Entwistle said. “We can invest harder and we can invest in price as well.”