This isn’t a ‘should it, shouldn’t it’ question. For pensions, savings and investment businesses, the move to next generation technology is a strategic imperative if they’re to respond effectively to consumer demand and market innovation. Bluntly, it’s the only viable option to remain competitive.
We’re familiar with the trend towards platforms. Fragmented consumer experience caused by multiple systems and products is no longer sustainable. The market demands transparency, simplicity, lower costs and digital access.
Knowing there’s a trend is one thing. The value lies in understanding the drivers. The shift to flexible technology that supports, a joined up user experience is inevitable because of the combined strength of legislation and consumer pressure.
RDR provided the foundation with the power shift from provider to consumer when client fees replaced commission. Auto-enrolment has seen pension scheme membership in the private sector rise.
And although it’s early days, indications post-pension freedoms are we’ll see consumer pressure on the industry for innovation. Awareness they can take their money out is high among consumers. Their two biggest issues are access and understanding.
Understanding can only be achieved through education. This is no longer a ‘nice to have’ but a critical component of any proposition. Showing people how their pension interacts with the rest of their wealth depends on tools and good communication; and on providing a consolidated view via technology – whether on or off platform – of legacy and new assets.
Headlines about consumers “refused access” to their pensions, give a hint of the complex, practical challenges for providers with legacy products on inflexible systems. Typically huge value sits in legacy books and these customers are no longer dormant. Keeping these customers and their assets is the prize.
In the platform space we already see variation in provider offerings in the at-retirement space. All of this suggests we’re some way away from offering consumers easy access to their savings when and how they want it.
The latest Government consultation paper on strengthening incentives to save also talks of innovation in distribution and points to the aggregation of savings on platforms. The convergence of legacy and platform technology is the only credible long-term response and the natural next step in the sector’s evolution.
So what next for providers with different business models? Recent history has taught us this; if your technology can’t cope efficiently with regulatory change or integrate with your clients’ other software, you risk losing those clients.
Different models are doing well in the platform market, from established players with scale to newer entrants. Some who have adopted a vertically integrated model offering platform custody and asset management have shown strong growth. This is a model with convergence at its heart.
There may be no direct pressure from clients to look at your underlying technology. But whatever your model, the spotlight will shine on difficult to update solutions that inhibit consumer engagement and access to their savings when they need them.