Platform One’s Alex Cowan-Sanluis talks to PMP about the future demand from retail and wealth investors and the challenges platforms face being able to support access
Platform One is a digital-first, flexible wealth platform. It provides services from custody and trading execution to client engagement on a single platform. It offers technological and regulatory flexibility to a wide range of intermediary types.
It offers three solutions. IFAs can opt for its standard adviser wrap platform, through which they can offer their clients all Platform One’s services. Large intermediaries that want more control can choose an evolved wrap, in a ‘adviser as platform’ or regulatory Model B agreement. IFAs and fintechs can select its white-labelled platform and add their own branding.
Alex Cowan-Sanluis is the chief executive officer of Platform One, a role he has held since 2019. He was the co-founder of adviser wrap platform technology company Kodin, which became part of Platform One.
The government is paying a lot of attention to private markets. Is this enthusiasm shared by retail investment providers?
Cowan-Sanluis: It’s certainly ‘flavour of the month’ for the government. Despite telling retail investors that illiquidity is bad for 10-15 years, the FCA has changed its tune and now wants to get money into private markets. Large providers are pushing to offer greater retail access and the FCA is preparing the launch of the [private companies stock market] PISCES.
Advisers tell us that their retail clients are asking about private markets – and are asking us what we can offer. The government’s work is starting to seep into the psyche of a certain type of retail client.
How can platforms provide access to private markets?
As an adviser and wealth platform, we provide our clients with access to whatever they want. Historically, there was no appetite in the advised community because regulators didn’t allow access. Illiquid investments were taboo – but sentiment is changing and interest is increasing.
Since inception, we’ve been at the vanguard of platforms offering access. We’ve offered Enterprise Investment Scheme (EIS) and Seed EIS (SEIS) funds for a long time, and we’re expanding in this area.
There is a huge reticence in the adviser platform community to support private assets. They often claim the regulator hasn’t provided enough clarity or there isn’t enough appetite. But, if both were present, they still wouldn’t be able to offer access, as their systems, technology and processes were not built for them. To reverse engineer or overlay a new platform, all the way through the trading and investment lifecycle, would be a nightmare. Whereas, as a challenger platform, we easily can.
Among which client do you see the biggest uptake?
Cowan-Sanluis: Not every IFA wants to offer private market access. It depends on their client base – its demographics, size and average wealth. Most IFAs will take a conservative approach and only allocate a small percentage of high-net-worth clients’ assets to private markets.
Is it in the interests of IFAs to promote private markets funds?
Cowan-Sanluis: RDR applies to everything on a retail platform, so advisers cannot receive commission. If a platform facilitated an additional financial incentive, the regulator would shut it down the next day.
IFAs may be able to justify increasing ongoing advice charges for more complex strategies – but I haven’t seen that. They are more nervous about losing customers than looking for an uptick in fees. They are very careful, given Consumer Duty and Value for Money. Private market access will likely be used to justify maintaining fees, rather than increasing them.
However, advised assets only contribute 45% of our revenue – the rest comes from SIPP fees, tech licensing and our execution-only platform. We provide intermediaries – wealth, investment and fund managers – the ability to offer extra services. On this side of our business, we’re closer to the underlying customer and see growing appetite for private markets.
How do you see the platform market evolving?
Cowan-Sanluis: Platforms will need to facilitate access to private markets, whether they want to or not. It’s where advisers and retail customers are heading and where the political winds are blowing. There will not be huge growth in the share of platform assets allocated to private markets in the next couple of years – it will be a small percentage for a specific client type. But even a small percentage could be substantial when there is a couple of trillion pounds on platforms.
Long-term asset funds (LTAFs) will be the first product to be adopted. The regulator is signalling it’s okay to invest, which strengthens the risk tolerance of advisers and intermediaries. But I doubt LTAFs will be the main private market vehicles on platforms in 10 years.
Will all platforms offer LTAFs?
Cowan-Sanluis: LTAFs are still developing but I suspect at least 90% of them won’t support daily trading, so most large platforms won’t be able to handle them. It’s very difficult for incumbent platforms to facilitate them because of the way they trade, as they require capital calls among other things. They would need to change their systems to manage redemption structures and evergreen PE funds.
Platforms have got to weigh up how much it would cost to revamp their systems, processes, compliance, governance and oversight against the potential loss in holdings if they do not offer them. A £100 billion platform could probably rest on its laurels – but it makes more sense for smaller and more flexible platforms to offer access.
Will the trend have a greater impact at the top end of the market?
Cowan-Sanluis: I think so. It’s a lot easier for a client with £10 million to allocate 5-7% to private markets than it is for a client with £100,000.
All client types want access to a general trading account, pensions, ISAs and Junior ISAs – but some will also want venture capital trusts, LTAFs and other private market access. Having everything holistically in one place is clearly easier for customers and advisers.
What private market funds do you currently offer?
Cowan-Sanluis: We’re taking it slowly, so it’s limited at the moment. We offer a handful of private equity, private credit and infrastructure funds. But our clients can also select private funds via our access to Allfunds’ alternative investment offering, which includes Franklin Templeton, Carlyle, Blackstone and Apollo, among others.
How do you plan to develop your offering?
Cowan-Sanluis: We are expanding EIS and looking at LTAFs. There’re lots of different options and we are exploring partnerships with a wide variety of providers. Platform One will not seek to co-run any funds – we want to offer ‘whole of universe’ access.
Is liquidity a big consideration for your clients?
Cowan-Sanluis: Liquidity becomes less of a consideration with increasing total wealth and smaller percentages allocated. I always thought the regulator’s focus on liquidity was strange. It is not bad or dangerous for an asset to be illiquid for a period. An investment property is not liquid.
Stock market funds technically aren’t liquid either – as they can be gated at any point by the fund manager. That has been evident with the Woodford fund over the last few years.
The concern around illiquidity should really be focused on governance and controls. Standards have improved significantly over the last 10 years. Platforms like ours have an enhanced their onus on governance – we have a product governance committee that feeds into the regulator. And annual due diligence assessments have become quite serious things.
Investors should also be more concerned about diversification. Mutual funds contain a limited range of publicly listed companies so the pool for diversification is a lot smaller than most people claim. This puts a lot of eggs in one basket. If an index is concentrated in a few huge companies the entire fund would make substantial losses if a single company fails. Do you want to be exposed to that kind of risk?
Are retail investors knowledgeable enough to invest in private markets?
Cowan-Sanluis: Only 8% of UK adults have access to advice but 50% do in the US. There’s a big push to catch up with the US, rightly so, to provide people with access to advice. Private markets will play a big part in this. Number 10 and the Treasury want to make it happen and we all need to play our part.
I don’t think it’s right to prevent retail customers accessing private markets. There’s a lot of activity, a lot of capital and a lot of potential returns in them, as that’s where most companies and infrastructure projects are traded.
HMRC launched the EIS and SEIS structures to encourage investment in these sectors. Ironically, these were created for the riskiest end of the market: startups and the smallest companies. While these are fantastic, what about mid-size private equity with a lower risk profile? It makes sense to find a halfway house between startups and listed companies.