Awards For The Most Profitable and Biggest Loss-Making Platforms

So if you saw our #PlatformProfitability Awards on twitter this morning and wondering what on earth is going on… it’s part of our Guide to Platform Profitability  – the first ever of its kind  in the industry providing a detailed analysis for advisers on profitability of platforms.  

Platform Profitability Ratings

A key feature of that guide is the Platform Profitability Ratings assigned to 20 major platforms. We know that making comparisons between 20-odd platforms of varying asset sizes and business models can feel a bit like comparing apples with oranges. So we put platforms into three main categories based on their AUA at the end of 2013.

  1. Large Platforms: those with assets of £12.5bn or more. In this category you have Cofunds, FundsNetwork, Old Mutual Wealth Platform, AJ Bell, James Hay, Standard Life and Transact
  2. Mid Sized  Platform: AUA of between £5bn and £12.5bn. Here you have Axa Wealth Elevate, Ascentric, Nucleus, 7IM and ATS.
  3. Small Platforms: those with AUA between £1bn and £5bn and in this category you have Zurich Platform, Raymond James, Aviva and Parmenion.

This puts everyone in a level in a level-paying field. Let’s introduce you to our Platform Profitability Ratings; there are four ratings, each with a colour code –  Excellent (Green), Good (Light Green), Average (Amber) and Poor (Red).

So, in this post, we name the most profitable and the biggest loss making platform in each category. Ready? 

In the large platform category, the most profitable platform award goes to…

Platform Profitability Rating AJ Bell

 

AJ BELL

AJ Bell leads the pack amongst large platforms with excellent profit margins, and a stable yield on assets. Platform assets have overtaken non-platform SIPP business, and account for more than 62% of AUA. The business has acknowledged it will take a hit on profits given its reliance on interest creamed from cash accounts on its SIPP book, however, with a profit margin in excess of 40%, it’s got more than enough room to accommodate this.

In the large platform category, the award for top loss making platform goes to…

Profitability Rating - Standard Life Wrap

 

STANDARD LIFE WRAP

On the surface, Standard Life has the appearance of a proposition with everything going for it: the technology is provided by FNZ, it’s running at fifth place in terms of asset size in the entire industry, and it sits within a strong asset management business that invariably drives assets to the platform through its MyFolio range, Standard Life Wealth and other products. Yet, losses continue to mount at a worrying rate and its P&L account reserve shows losses of around £194m have been accumulated over the years, the largest in the sector to date. On a positive note, having successfully undertaken share class conversion for the majority of clients on the platform, the Standard Life is arguably better prepared for the regulatory changes than the likes of Cofunds, FundsNetwork and OMW.


In the mid sized platform category, the most profitable platform award goes to…

Platform Profitability Rating - 7IM

 

SEVEN IM

7IM is the poster child of the group, with strong profit margins and above-average yield on assets resulting largely from its investment management activities. The business has made profits in each of the past three years. The business transferred into an LLP in March 2013, and so the P&L Account Reserve isn’t applicable. However, we know from the Ltd account in the previous year that this is in positive territory and the business remained profitable in 2013.

In the midsized platform category, the award for top loss making platform goes to…Platform Profitability Rating - Axa Wealth Elevate

Axa Wealth Elevate

Despite having the highest AUA in the mid-sized, Elevate has failed miserably to make a profit and losses continue to mount.  Going by its P&L Account Reserve, the business has spent well over £100M since getting the business off the ground, which is more than ten times the amount spent by its peers Nucleus and Ascentric, but there’s no evidence whatsoever that Elevate is any better in terms of service or technology. This begs the question: what are they spending this money on? Piling up losses with no end in sight in the name of ‘investing’ in the business is no way to run a platform.


In the small platform category, the award for most profitable platform goes to…

Platform Profitability Rating - Parmenion

 

Parmenion

Parmenion is a great example of profitability and viability, with strong profit margins and yield on asset, thanks to a clever approach to lend its discretionary management expertise to firms who wish to run their models on its platform. The company turned a profit in its third year of business when it had less than £100m AUA and has remained profitable since — almost a fairy tale in platformland.

And finally for the top loss making platform in the small category,

 

ZurichPlatform Profitability Rating - Zurich

Zurich can probably be forgiven for being the bottom of our ranking for small platforms, it only launched the platform in 2012. So we have some sympathy for them. The platform sits within its off platform Sterling ISA business, but the £75m losses over the last 3 years gives you some idea of the cost of getting the platform up and running. It will probably take the platform a few more years to become profitable, not to mention plug the £100 million hole in its profit and loss account reserve.

 

Thanks to everyone who attended the Twitter Award Event!

Abraham Okusanya
Director
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.

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