The recommended platforms market has used the success of Hargreaves Lansdown to justify the mantra “if you don’t make a 50% profit margin, you’re not at the races”, according to David Ferguson.
The Nucleus founder and new chief executive of white-label platform provider Seccl told Lang Cat Live yesterday (February 10) that the platform market should consider cutting profit margins and investing more in their business.
“There definitely seems to be something going on in the rig market, perhaps led by the big hit Hargreaves Lansdown, where it’s become accepted that if you don’t make a 50% profit margin, you’re not not at the races,” Ferguson said. .
“And maybe instead of making a 50% profit, you’re better off making 40 or 30% and investing a little bit more as you go.”
FTAdviser has contacted Hargreaves Lansdown for comment.
When asked who in the platform market are the allies and foes of financial planners, Ferguson said it was a question of which companies were and were not aligned on information and l ‘aggregation.
“You can see it in the way companies behave. You can see it through the way they think about pricing,” he explained.
“There is a huge information asymmetry in this market. There is also a huge aggregation asymmetry.
“I always struggle with things like pricing models, where a company will say ‘we charge X, that’s our aggregate price, and we also charge that if you take a direct debit, and that if you take a payment of income with your statement, we take a margin on cash”.
“No one adds up these little things at customer level, because it doesn’t matter, it’s like £20, or just £50 there.
“But actually, the aggregation asymmetry is that the company is making a lot of money on this stuff.”
In recent years, Ferguson argued that the platforms have made nearly half of their profits through fees such as interest on cash. “I suspect it’s not very clear when they promote the price and the proposal.”
But for financial planners, this lack of transparency around the sum total of platform fees simply makes their lives more “inconvenient”, according to the Nucleus founder.
He continued, “All it does is create unease somewhere for financial planners. If someone finds that, instead of paying 30 basis points for a platform when I’m actually paying 36.
“There is an honesty and truth in financial planning that resonates strongly with some technology providers or asset managers. And then there are others for whom this line is not so true.
Ferguson argued that these vendors on a financial planner’s side are the ones who actually see themselves in the same value chain.
“If you look at who the allies are here, they have to be very values-aligned people who recognize ‘I’m actually in your supply chain, I work for you’.”