Standard Life has been accused of ‘missing a trick’ by targeting its wrap at IFAs and not launching a direct to consumer execution-only proposition, by analysts at Société Générale .
In a note to investors SocGen analysts said the Standard Life Wrap should not restrict itself to advisers when research showed around a third of investors ‘would never pay for advice’.
It said Standard Life senior management were nervous about a direct to consumer platform as it could alienate IFAs who would view it as a threat.
‘We think there should be a direct to consumer version of the platform. However, management is on tenterhooks over the matter, fearful of generating friction with their own IFAs, who are likely to perceive such a move as a threat to their business, having accused management of wishing to steal their book of clients in the past,’ it said.
‘Standard Life is missing a trick in our view by restricting the provision of its platform to individuals choosing to use an IFA. A significant portion of the market is not willing to pay for financial advice. Surveys suggest around 30% of individuals “would never pay for advice”.'
SocGen was also critical the wrap’s reliance on third party technology provided by FNZ, which it said was free to sell its technology and implementation experience to Standard Life competitors.
The note said this ‘major flaw’ meant Standard Life had a first mover advantage but not a competitive advantage and pointed out that AXA Wealth also use FNZ’s technology to power its Elevate wrap.
It predicted that due to its competitors being able to catch up with it technology-wise, Standard Life, like other platform providers, would need to give more of its margin away to IFAs to attract and keep them in order to hit profitability.
'Our key concern with the business model is that IFAs can be bought with the lure of higher profits on other platforms,' it said. This would be possible if a competitor utilises similar underlying technology more cheaply or effectively, allowing advisers to charge a higher proportion of their total charge, or if the platform levies a higher total charge to the individual customer.’
The analysts also predicted a cull of platforms from the current 22-strong players in the UK at the moment.
It said: ‘Using Australia as an example, where the financial services industry has had its own version of the retail distribution review. The number of platforms in the market shrunk to around eight platforms. We believe the UK is likely to see a similar trend as IFAs move from using multiple platforms to being more selective.'