Happy Wednesday siblings, and I hope your weeks are filling your corrupted, atrophied, blackened little hearts with sparks of joy. I regret to have to remind you these will inevitably be snuffed out faster than a UK Eurovision entry’s hopes come the voting rounds, but in these days we have to get what pleasure we can whenever it’s available.
Similar Kondoesque sparks of joy may be available if you can be in London on 24 June, for that is when five of the funnest, sparkiest, advisertechiest advisertech firms that ever there were will show their wares at our Catwalk 3 event. We’ve picked the finalists now and it’s all set to be quite a show. Not telling you who they are yet, as we’ll drip that out over the coming days. I can tell you though that we’ve managed to get Catwalk CPD’d so if that makes a difference then you are all set. Details and tickets are here.
I read this editorial in Citywire with interest last week: Platforms risk becoming the new life cos. The main argument, so far as I can make out, is that a combination of lacklustre service, taking margin on cash interest, and slow transfers means advisers will look to desert platforms in the same way as they did lifecos 15-20 years ago.
Bad service is bad, the cash interest thing is problematic in disclosure terms if nothing else, and slow transfers are a bug needing squished. But I’m not sure that these are enough for history to repeat itself. As much as we all enjoy taking potshots at lacklustre propositions or performance where we find them, there’s more to think about here.
First of all, let’s remember a couple of major enabling factors. Lifecos for the most part offered highly restrictive contracts, characterised by limited investment choice, complicated charging and, of course, commission. This did for a few of them; the balance sheet just couldn’t deal with the product churn which was so endemic at the time. Contracts which needed to run for 11 years to break even had 1-year lock-in periods and many, many advisers – yes, including some of you reading this, I see you shuffling around nervously at the back – took full advantage. “If they’re stupid enough to pay it I’m clever enough to take it” was the mantra.
Take commission away, offer massive investment flexibility, and remove complex contract terms, and you’ve got the perfect growing environment for platforms. Add to that superfast broadband in offices – not something that was a given in 2008 – and we’re off to the races.
Life company service was often crap, it’s true. The velocity of money in terms of transfers was even more sluggish than it is now. And costs? Well, the main issue isn’t that charges were too high (held to term, a lot of insured business was actually pretty low cost). It was more that you couldn’t work them out without an actuary, and we all know about THEM.
I don’t think conditions exist for another evolutionary step-change yet. No doubt they will at some point, but for now even the most shiny of latest-generation offerings look awfully like faster horses, if horses were massive relational databases of financial information and plumbing leading out to investment managers, custodians and messaging services, which they aren’t last time I checked. That’s a lie. I’ve actually never checked. I don’t know anything about horses, really. But it seems unlikely.
So I think we’ve got platforms, of some stripe or hue, in our lives for years yet. However, I do think there’s an important point here, which has to do with decadence and entitlement. Platforms may come to resemble lifecos but I don’t think it’s to do with service experience, or commercial approach. Those are symptoms; they’re not the disease.
The disease is common to almost any business which is engaged in looking after other people’s money. It’s called “AMSOMO” which is an acronym, and it stands for “A Mistaken Sense Of Monetary Ownership”. This is a well-known fact and is in no way something I just made up.
The issue with AMSOMO is that it leads to an horrendous sense of entitlement; that these are “our” assets rather than the assets of the poor Mister and Missis Migginses who are trusting advisers, platforms, fund managers, custodians, transfer agents, Shug the window cleaner and a small mouse who lives quietly behind the hot water tank with their money. Incidentally, I found out yesterday that mice mainly don’t need to drink if they have a varied food source; they can get their water needs from their food. Isn’t that interesting? Rats need to drink, mice don’t.
Rodent-related matters aside, that sense of entitlement in my view is what undid the lifeco sector. When you get comfortable sitting on a trillion quid of other people’s money, you start to get comfy, and then just <imagine> the shock you get when that money starts flying out the door. For lifecos their AMSOMO led to a massive underspend on new tech, obstructive servicing, over-complex products, horrific distribution deals and all the rest. These are all well known symptoms.
For platforms the risks are similar. “We’ve got £50bn” sounds like an innocuous statement of fact, but blithe statements like this are an early manifestation of AMSOMO. Undue comfort leads to entitlement which leads to falling asleep on the job, and then we get the symptoms that Jack describes in his editorial.
Advisers can deliver the antidote to AMSOMO, by resisting the trope that all platforms are basically the same, and really really looking closely at suitability; and by making a move where it’s the right thing to do, even if it’s more work. But here’s the tricky bit that will really bake your noodle Neo – advisers can suffer from AMSOMO themselves. That sense of entitlement, of smugness, of impregnability isn’t limited to big providers.
The truth is none of it was ever this industry’s money in the first place. It belongs to the clients. That seems self-evident and it should be, but it’s sooooo easy to lose sight of that. Some advisers are reporting clients moving off to D2C, as I’ve written about before. That’s a consequence of AMSOMO right there. And it leads, sure as night follows day, to GYMBOA. If you want to know what that is, you can look it up. Why should I do all the work?
Your music choice will come as no surprise if a) you read the title and b) you’re an Eighties thrash fan. Please enjoy Madhouse from Spreading The Disease by the mighty Anthrax, who were always better than Megadeth.
