Hello and felicitations, I hope your weeks are, inasmuch as they are a work in progress, an eructation of magnificence. Magnificent eructations are what we’re all about and you can quote me on that. 

This week’s Update is a bit of an experimental one and the experiment, which will shortly be carried in major scientific journals, is called “what happens when Mark writes the Update a bottle and a half of Pinotage deep on his dad’s birthday with a bottle of Bushmills next to him and Sisters of Mercy on the stereo?” 

Magnificence, that’s what. 

Talking of magnificence, there’s no point in having your very own Update if you can’t use it for personal stuff sometimes, and I’d like to take a moment to pay a moment of homage to the Lang Faither, who is not only a miracle of modern medical engineering, but is also an outstanding guy on every level despite the world of hurt he’s been blessed with (not least with having a son like me), a brilliant grandfather and the kind of dude who quietly makes the world better. 78 years young. Happy Birthday Dad. 

So listen, there was a bank holiday (which I didn’t take) and that means everyone’s on light duties this week. You don’t want Proper Content. You can’t handle that this week. This is a week for fluff and ephemera and perhaps a feel-good story along the way. And because I am nothing if not an Obliging and Munificent Updater, I shall pause the beatings and oblige. 

Let’s talk about the power of language in lieu of real substance this week. It’s touring and conference season, and my handlers have allowed me out to do the odd session. This is rejuvenating because it makes you think about saying the things you have to say in a way that won’t get you bottled off whichever stage you’re on. It’s been a while since I did much of this and I’m pleased to say most fruit platters have remained unchucked to this point. 

At a couple of things I’ve been doing I’ve been asked about ‘white label’ or ‘adviser as platform’ or ‘adviser owned platforms’ as a big theme that people who identify big themes for a year have identified as a big theme for this year.  And this is the language I want to dig into. 

First up, let’s talk about what this is. I wrote about it in a paper – maybe one of the weirdest I’ve ever done – sponsored by Seccl back a couple of years ago. It was weird because I fundamentally disagreed with Seccl on who this model was right for (I think it’s evolved now for them) and to their eternal credit they were cool with me saying so right there in the paper they sponsored.  

White labelling is nothing new; we were doing it back in the day in 2007 for free for firms who wanted it. Whapping a logo and a set of colours on a style sheet ain’t all that hard.  White labelling isn’t the right phrase.  

There is a huge amount of interest in this model, which is essentially a co-manufacturing one in which the adviser pretends to be a platform operator and takes some revenue for so being.  

We can all agree that the biggest firms can do this; they have the bodies to make it work (that’s quite a different thing from actually managing to do so).  

But it’s everyone else that I’m thinking about. And this is where the language point starts to come in. Adviser-as-platform is wrong. The adviser firm isn’t the platform; it climbs aboard the platform choo-choo train and – in the best interpretation of the model – adds something beautiful, crystalline and unique over and above the core custody and trading functionality the actual underlying platform offers. 

The second phrase folk use is ‘adviser owned platforms’ – again, nothing new, advisers have had a shareholding in platforms since Ian Taylor (god rest him) was a lad. That’s not what we mean here. Advisers don’t own platforms in this model; at most they build some kind of user interface on top of a facility that they make use of on an ongoing basis. 

To me, the real way we should refer to this is “adviser-rented platforms”. The firm rents the technology. It doesn’t own anything. It’s not the platform. It rents the capability, and for the most part adds a bit of something, marks the price up by 100% and sells it on to a client. Which isn’t a problem as long as everything’s being done right – but let’s call it for what it is.  

When you do that, the market starts to frame itself in a different way. Of the £600bn or so on adviser platforms, maybe £50bn of it is in adviser-rented models. Will adviser-rented models be a growth area? Yeah, probably for a bit. But renting something and marking it up a bit is only so satisfying, especially when it comes with a risk and regulatory overhead. Maybe value comes from owning things, not renting them.  

This is a market of arithmetic. The margin for firms renting a platform and selling it on is between ten and fifteen basis points. There are a bunch of costs and hassles in doing this, not least in terms of new permissions and regulatory scrutiny. If 0.1% times the AUA is worth that then cool; otherwise you need some good other reasons. Your clients are still on a custody, dealing and trading platform. It’s still work to move them. You don’t own any technology you didn’t build.  

Firms doing this might be more modern and admitting of different models, and that’s valuable. But we mustn’t let the language get in the way.  

And your music choice this week is the soundtrack to a) me writing this week’s effort and b) most of my angsty teenage phases. Have The Sisters Of Mercy and Driven Like The Snow, and if you know the key bit of this song then you know, and if you don’t you don’t.