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Skandia: platform margins to halve by 2015
by William Robins on Jan 06, 2012 at 10:08
Regulation and competition will push down platform margins by up to 50% over the next three years, according to Skandia.
The life company said platforms will see margins squeezed down from current levels of 30-50 basis points (bps) to 20-25 bps in 2015, and predicted only 10 platforms would survive to 2015.
However, it said platforms would spread to the pension market with pensions on platforms increasingly displacing Sipps. Skandia said platforms would account for more than 50% of all new private pensions by 2015.
Nick Dixon (pictured), marketing director at Skandia, said the retail distribution review (RDR) and ban on cash rebates would mean platforms would have to fundamentally rethink their business model to survive.
‘Oddly some of the wraps seem to be assuming it will be business as usual for them post-RDR but in reality their business models face a fundamental challenge.
‘The Financial Services Authority (FSA) is currently minded to ban cash rebates. Most wrap business models rely on cash rebates and if these are banned their model has to change. Many wraps seem to be focusing on getting the FSA to change its mind rather than on building a solution.’
Skandia said platforms must also react to increasing demand for ways to take income from a portfolio of platform investments as well as accumulate them.
It added that investors who had suffered from stockmarket volatility would be looking for alternative or passive investments and that guarantees would play a bigger role in portfolios. Skandia said passive investments would account for over 30% of platform assets by 2015.
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8 comments so far. Why not have your say?
Paul Barnard
Jan 06, 2012 at 11:00
I would like one of those passive investments that doesn't suffer from stockmarket volatility please
report thisMan of Kent
Jan 06, 2012 at 12:25
Paul, what you want is a public sector pension.
report thisPaul Barnard
Jan 06, 2012 at 13:37
Yes, I have realised this too late in life.
report thisMPT
Jan 06, 2012 at 14:11
Paul Its called the Skandia Cash account that pays a whopping 025.% below bank base rates.!!!!!
I think once the RDR happens those fee based IFAs are not going to support packaged products in the same way they have.
A Couple of reasons - Most Fee based clients will be HNW and will not want the dreadful retail priced offerings currently churned out by the industry.
IFAs will have a duty to really seek true institutional pricing on funds.
Providers have not factored that to make a platform an attractive admin tool it will need to facilitate solutions to allow for adviser charging to several entities at the same time.
Financial Planer
Investment Adviser
Legal Trust Adviser
Tax Adiviser
Whilst these may all be one in the current packaged world in a "Planners World after RDR this may not be the case.
report thisPhilip Melville
Jan 06, 2012 at 16:48
MPT
Yet another fatuous dismissal of the public who are our marketplace.
Most stuff on Transact is bought at Institutional pricing and most clients are certainly not of the mythical HNW variety.
If only advisers could get their heads out of their bottoms and engage brain they just might see the biggest most receptive market for financial advice that this country has ever seen.
No it is not the same old commission based sales marketplace and yes you will have to do things differently but my goodness the rewards that await are tremendous!
Buggar all to do with qualifications or any of the other current industry obsessions - just a need for good advice in troubled times!
report thisDavid Ferguson
Jan 09, 2012 at 08:58
I fear that fund supermarkets may have rather more reinvention ahead of them than wrap platforms. Also, most wraps already offer sophisticated income withdrawal options and have a significant volume of assets in passive instruments (Nucleus was around 25% last time I looked). That said, I'd echo Paul B's comments re volatility and passive funds!
Also, can we extrapolate from Nick's comments that Skandia's current revenue line is nearer 50bp? And that for a closed platform reliant on rebates.
report thisBert Poppins
Jan 09, 2012 at 12:07
Rather than predicting how many platforms will exist in the future (a pointless task really), why do Skandia try something less subjective and tell us what they're unbundled pricing model will be? Unless they want to keep their powder dry whilst looking for a new parent company.
report thisc.nicol
Jan 11, 2012 at 18:39
Phil.....from spelling in your last paragraph I deduce you went to public school and a very upmarket one at that....
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