Recep Peker

Platforms are gearing up to launch low-cost options to compete directly with industry funds to address advice affordability, according to research from SuitabilityHub.

The firm’s ‘2024 Platform Market Wrap’ report found there is a focus on improving client outcomes via low-cost options such as CFS Edge Accelerate 100 and HUB24 Discover.

Managing director Recep Peker tells Professional Planner those two options have an attractive total cost which competes well with profit-for-member (otherwise known as) industry funds.

“It means if you have a client with a relatively simple situation, they don’t need all the bells and whistles, they don’t have complex investing needs, there’s a nice alternative for you as an adviser,” Peker says.

“The benefit is, if you have client funds on one or two platforms, it enables the adviser greater administrative efficiency whereas if you have the client funds across multiple platforms and multiple industry funds at the end of the day that does increase the cost to serve clients.”

Peker says there are multiple levers that advisers and platform providers could pull, and this can vary from going with lower cost options for lower balance clients, but also articulating the value of higher cost products.

“Generally speaking, what’s seen as the easiest lever is the fee lever, is discounting the product,” Peker says.

“If everyone is competing on fees and we end up having a fee war, it ends becoming a race to the bottom and you end up with an industry that is not profitable.”

Alternatively, Peker says, it could also be the case of the core platform proposition no longer being profitable, which means platform providers must rely on other revenue streams.

“We saw in the UK where Aviva Wrap initiated a big fee war between platforms and now it’s gone to the extent where some platforms are adopting vertical integration again by building their own adviser distribution,” Peker says.

“If you go too cheap as a proposition and you’re no longer profitable then you have to make money in other ways.”

This could include foregoing platform fees and instead making money on transaction fees or investment management fees.

“The revenue mix gets shifted and overall, it means the industry isn’t as transparent around the total costs,” Peker says.

‘Uberisation’ of platforms