From Kodak to Blockbuster, big companies that failed to innovate have been swept aside by tech challengers.
Digital disruption is a feature of our times – and platforms should take heed.
Since the government scrapped compulsory annuitisation last year, Association of British Insurers figures showed 63,000 retirees have moved £4.2bn into drawdown.
As pensioners keep their pots invested into old age, advisers are looking for flexible ways to deliver income payments to clients and manage cash flow across different tax wrappers.
But when it comes to getting money off platforms, the vast majority of providers have been slow to react.
Research by the platform consultancy lang cat for Zurich found just three out of 14 platforms could offer a regular consolidated payment from across all tax wrappers, and only two could deliver this on a date chosen by the client.
For the industry and consumers, this is a worrying place to be. The average age of a platform client is now 58, and the full retirement age is 64. With two to three decades in front of them, clients now typically spend a bigger part of their platform experience in retirement, rather than accumulation.
Platforms have gained a whole new consumer base but almost all have yet to develop an effective way to serve them.]
The laggard response of many platforms to the new retirement market places both advisers and consumers at risk
For the first wave of retirees through the freedoms, this will only result in a poorer experience and one which the current upheaval in the platform market is doing little to help.
How many providers will fail to innovate because they are too busy re-platforming instead of looking for future opportunities?
For advisers, the lack of income innovation presents its own problems. Keeping track of cash levels, for example, is now increasingly complex as more clients place their pots in drawdown. A slip up means clients don’t get paid.
Yet a little over half of platforms tested by the lang cat featured auto sell down, a feature which automatically disinvest funds if insufficient cash is available.
The laggard response of many platforms to the new retirement market places both advisers and consumers at risk.
Fit for purpose?
As more and more clients enter drawdown, juggling income levels will become increasingly complex and time-consuming. Outdated platforms will tie up adviser time, add cost to their business and increase the risk of their client not receiving a regular income.
With due diligence a prime focus for the regulator, now might be a good time for advisers to ask how fit their existing platform is for the pension freedoms.
While a small number of platforms are transforming their systems, the majority have taken only tentative steps.
In this new order, platforms need to be nimble and flexible cash machines, not clunky wealth accumulators. Those that get it right could steal a march on their rivals while those that continue to lag behind are likely to find their market share – or ongoing viability – under threat.
As platforms scramble to catch-up with the new retirement market, digital disruptors will no doubt be waiting in the wings. Platforms that foster a culture of innovation will remain at the forefront while those that don’t could face their own Kodak moment.
Alistair Wilson is head of retail platform strategy at Zurich UK Life
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