The platform industry talks a great deal about the importance of scale – large providers are assumed to be financially strong, profitable, sustainable and resilient; smaller providers, not so much. But we’ve always argued that, while scale isn’t bad thing, the bottomline is far more important in assessing long-term sustainability of platforms.
Does scale necessarily lead to more profits? As our latest Platform Profitability Guide shows, the answer to that is an unequivocal ‘NO!’ On the other hand, if you deliver great service that advisers and clients love, profitably, regardless of size, there’s no reason why you can’t thrive in this highly competitive market.
The resilience of platforms is being tested by regulation (RDR, PS 13/1), Pension Freedoms, technology and intense competition, and so far, it’s the big, unprofitable providers who are buckling under pressure. The smaller guys, running profitable operations are coping pretty well.The resilience of platforms is being tested by regulation, technology and intense competition. Click To Tweet
Enter Wealthtime, a small wrap platform based in Hampshire. Wealthtime had just £0.68billion in AUA and 12 staff in 2014, but managed a profit of £0.53million on revenue of £1.3million, a profit margin of over 40%.
If ever there’s a ‘small giant’ in platform land, it’s Wealthtime. I say that, not just as a someone researching and analysing platforms, but as a regular user of platforms in our work with advisers. Wealthtime’s service is impeccable, and functionality, tax wrappers and pricing get top marks too. CEO Jan Regnart, (formerly ran James Hay) runs a very tight ship, managed to turn a profit in its fourth year in business and now has the second highest profit margin in the advised platform sector!
Yield on assets is below average, no thanks to its fixed price model, which it has now largely abandoned. The website could do with a bit of upgrade and we think the team should shout a little bit more about the excellent work they do.
Wealthtime’s AUA is now up to £800m (June, 15) and it’s making progress towards that all emotional £1 billion milestone! Scale isn’t a bad thing and Wealthtime will need to find ways to appeal to a wider adviser audience to achieve that.
Of course, the landscape changes all the time, so there’s a need to keep a close eye on providers. Wealthtime is definitely one to watch!
- Check out the Platform Profitability Guide (2015) to see how this provider stacks up against 22 other platforms.
- To request a free excerpt of the report, just complete the form below and we’ll email you a copy ;
Video 2: Platform Pricing: Myth Vs Reality
Request our next video on the relationship (or lack thereof) between platform pricing and profitability. We examined price of assets on platforms, not just in basis points and % but also in £ and pp.
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