It’s Rich Mayor here again, standing ankle‑deep in spreadsheets while crunching the first quarter numbers. There’s still embargoes around that, so you’ll have to wait for the full details of cautious merriment of what was a good quarter for platforms on the whole. It’s also been oddly reminiscent of the first quarter of the year before, when there was by comparison some mild tumult across the pond which had abrupt, but comparatively brief effects which essentially boiled down to negotiating some numbers on an orange board.
Staring at numbers and geographical distance can make me uncomfortably ignorant at times of the effect of conflicts. Such is the immediacy of modern life I suppose. I’m also buying a house so maybe that’s played a part. Either way, it can get you down.
But alas the weekly Update stops for nothing and tends to be formed by the bit most recent in mind. This week that is the totally-non-controversial subject of cash on platforms.
The thing that used to sit quietly in the background, doing very little, making nobody any money and causing almost no arguments. The “we would not like you to hold significant cash and may even write to you if we think you’re holding too much of it on our investment platform”. The “just leave a bit there for charges” part of the portfolio. The savings rate for the client’s bank account.
Over the past couple of years cash has gone from operational necessity to strategic decision, from footnote in a buried away webpage that you can never remember how to find, to headline. Repeated headlines. Advisers are talking to clients about it. Platforms are designing propositions around it. Regulators are peering at it over the top of their spectacles with furrowing brows of something that could one day resemble concern. And, inevitably, everyone is now arguing about what is right and what is wrong.
Platforms haven’t suddenly discovered cash. They’ve always earned something from it, one way or another, it just didn’t make any material difference to anyone. With higher rates sticking around, ageing client books holding months or years of income, competition from annuities hoovering up pension assets and of course the instinctual and perceived ‘safe’ haven on the shores of platforms, cash balances are more visible than they’ve been for over a decade.
It used to be operational, but now often it’s strategic in one way or another. A couple of years ago when rates started rising, we predicted that a new battle ground for platforms would be competing on giving the best rates to customers. And indeed, some have, or indeed one has.
With the news from York that Aviva is going to be retaining a margin on cash interest held on platform, we’re down to just one major player on the other side in Transact, while everyone else is doing something different. But then it’s kind of made a name out of doing that for some time I suppose.
From the platform point of view, I get it. Or I can get it if I choose to. The shape of the market in terms of revenues, asset growth, flows on and off platform and competition from off-platform stuff means balancing the sheet with the commercial aspects is more and more dicey. I seem to remember that some platforms might’ve been in a tough spot over recent years had the revenues from cash interest not boosted them, and you’re not attracting new supporters if the maths ain’t mathin’.
That’s the provider side. But of course, the only person that is ultimately and directly affected by this is the client, and their coal-face companion, the adviser. News of changes in approaches to collecting cash mean conversations with advisers after letters land on the door mat. One that feels more like a bank conversation, but one where it’s often not easy to work out exactly what it means in pounds and pence, and god help them if this results in comparing the rest of the market, because everyone is different, it changes all the time and the amount in cash can fluctuate too.
However, that isn’t really on is it. The platform market has come a long way in transparency and simplification for the better and this feels like a throwback to more complex times. Even knowing exactly how things work doesn’t make it easy to explain, or feeling fair, or whatever you intended it to be.
This is where we bang the drum again that we should be doing better here collectively. Transparency is essential. People are gonna find out anyway. They might still like you. They might not. They might work out that it’s actually just a few basis points here and they’re all right with that because they get something they value elsewhere in the proposition. They might not. But at least the people you work with, and for, are going to be able to conduct a reasonable comparison and come to their own conclusion.
Buying a house also means my own cash balance remains stubbornly low, but my interest in it has, apparently, never been higher. I look at and compare platforms quite often, and this has been a right pain. It shouldn’t be this hard. Agreed?
