Four key news items this week which, combined, we think present a telling picture of where we see the market heading.

Google buy Beat That Quote; Hargreaves join the FTSE-100; Hector Sants confirms simplified advice will be “vital”; Standard Life says the wrap will be housed on the adviser zone portal in the future.

The theme, my friends? This slightly-wonky supplier-led notion of neat “distribution channels” is an outdated, impractical concept which does not map onto modern customers who will need different forms of advice at different stages in their lives. Very few people (especially in a world of adviser charging) will be purely non-advised, “simple” (!) or advised. The boundaries are blurring.

Google entering financial services has been an urban myth for ages. “Of course, Google are set to change the status quo,” many have whispered in a wink-wink-nudge-nudge way for years, pretending to be in-the-know. But now they really do have an entry route and the implications are fascinating. This D2C market is changing almost overnight. And Bang!, Hargreaves jump into the FTSE-100 which is a great result for them and boy, aren’t they an example of a business which started years earlier than everyone else, cornered a customer niche and have – I’m afraid to say – a business model which is irreplicable today and in the future.

Now – add to the Google and Hargreaves stories (confirming that direct sales are on-the-up) the acknowledgement by Sants that simplified advice is important (and by the way, flipping unclear!!) and our story develops. Quite how the mass market will be serviced remains hazy, but what is certain is that this comprises a huge chunk of those with savings and investments today and the model will need to look very different. Cue retail bank platforms.

Whilst may seem innocuous, Standard’s announcement about housing the wrap platform alongside the product platform is, I think, an acknowledgement that not every client or adviser will need or want the full wrap service BUT the principles of aggregation at reporting level still apply – the “one-stop” shop concept shouldn’t exclude clients who just need stand-alone products . There is a market for products still which are housed off a wrap and I think we’ll hear more of this from all the life co.s over the coming months.

There’s been a slightly two-dimensional story playing out for a while – wraps good, stand-alone products bad; wraps good, supermarkets bad; independent good, restricted bad. This is myopic thinking which is supplier-led and disregards the fact that most customers will have very different needs at different stages of their lives – and that there are different service propositions for each of us. Choice is a good thing – and sometimes choice doesn’t mean having a list of 2,000 funds, but having the choice to do something simple and cheap.

What I think this means is that we will start to gradually see some welcome differentiation in the platform market. The recent years have seen similar messages coming from them all- we’re a high net worth proposition targeting sophisticated customers. There aren’t that many of them (unless all my friends are lying and I’m just a loser......!? Oh.....) As the market develops as outlined above, there will be opportunities for platforms in the direct, simplified and product platform space – and challenges for those really focusing on just servicing the shrinking independent financial adviser channel.

As this channel shrinks, it is likely that platforms setting their stall out for this specific market will need to ‘upskill’ and develop propositions which can be credibly marketed to the wealth management and private banking channels too.

So today, you have D2C platforms, supermarkets, wraps and private bank platforms. Tomorrow, we think you’ll have D2C platforms (of which corporate is a sub-section), simplified advice platforms, product platforms and wrap platforms.....which may all be required by the same customer at different stages of their journey. We think that the successful financial advisers will be the ones that keen an open mind to this and see these other emerging segments as complementary, rather than a threat.

Have a lovely weekend.
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