He warns: "Some platforms see their own scale as the only objective and with that a requirement that advisers should flex their processes to suit the platform rather than the other way around. Innovation may still happen, but it’s questionable as to who benefits."
Continuing consolidation
As innovation continues so too will further consolidation, as companies look to achieve economies of scale and/or to capture more of the advised market audience.
But it seems M&A strategy in the space seems to operate at two levels, neither of which are optimal. Mill says: "At one extreme, there are a few smaller platforms seemingly intent on a race to the bottom in terms of pricing, as if cost is more important than value.
"At the other, you have a rush to scale, as if banging a few platforms together will automatically create a better, more valuable and more profitable business.
"Neither is a particularly good strategy, and both ignore the core reason we believe we’re all in business – to help advisers create better outcomes for their clients."
Then there is the ever-present interest from private equity investors who, according to Back, "continue to find the wealth management space highly appealing".
He explains: "There is growing demand [from PE] to invest in the sector due to demographics and increasing wealth coupled with the appeal of, in the main, repeatable 'annuity' income.
"The synergies sort are operational, with the potential intent to join entities together and create economies of scale through rationalising and/or consolidating any of the operating model or technology."
Tiller is not full of praise, however, for the way in which some PE companies go about consolidating.
He explains: "The prospect of private equity firms merging smaller platforms together in order to turn two Davids into one Goliath may, however, be quite naive.
"This, by definition, requires a merging of platform assets, which could require an entire replatforming project. These projects are massively complex and fraught with difficulty, even where the same technology service provider is involved.
"Whether private equity investors are prepared to make the significant investment in money and time remains to be seen."
It will come as no surprise to advisers to know there have been many issues with replatforming, which Mill calls a "very real pain" for advisers and their clients. And this potential pitfall never really goes away, despite companies throwing money at tech solutions.
Poor technological integration, an inability to scale up without creating issues, back-end technologies that could not 'speak' to each other, and a high friction interface between user and platform have characterised many mergers in recent years.
