Some extensive discussion and articles over here in the UK about that the platform battle will be fought out in the front office. Sorry, weren’t platforms about holding investments for investors…doesn’t seem like that anymore…
I think what we are seeing is the difference in the concept of a ‘platform’ to hold investments, trade, execute, settle etc, and the ‘platform proposition’. It appears that there is going to become a distinct difference, and with such, a difference in the economics and dynamics associated with each also.
It is likely that the business of ‘platforms’ are high volume scale game operations of which there are probably going to be handful of viable offers in each geography. But the business of ‘platform propositions’ is likely to be very different. With the ability to outsource back office functions to some of the scale players, yes it sounds like differentiation is very much going to be in the front office. But let’s examine this more closely…
Is it really going to be the case that each ‘platform proposition’ will develop all the componentry to provide a complete front office ? Isn’t that going to be expensive ? Isn’t that going to take time ? Hang on – isn’t that the business of technology vendors ?
If we look at this in a traditional sense, we could see that technology vendors and ‘platform propositions’ are perhaps going to converge. However, I think if we look at this more closely in a more Web 3.0 context, perhaps we can see some distinct seperations.
In this Web 3.0 context, ‘platform propositions’ are the businesses that put together front office componentry, fill it with data, integrate it with their back office providers, and make it look and feel how they want to to suit their target market. But, in order to do this quicker and keep it up to date, they can (and probably must, in order to be economic and keep up to date with innovations) use outsource third party front office ‘componentry’ from proposition enabling technoogy firms (such as Financial Simplicity). With such an approach, a ‘platform proposition’ can put together a highly functional, interactive and contempory proposition with model portfolios, managed accounts, portfolio tools etc together very very quickly. I think we are talking weeks — not months or years.
Which then begs the question, why wouldn’t every wealth management firm with any size then create its own ‘platform proposition’ ? Perhaps it will, which then poses the question what is the market for independent ‘platform propositions’ ? Are they just going to service the wealth managers and IFAs not big enough to create their own ‘platform proposition’? And at what cost?