Equiniti to launch platform pooling back office functions

Equiniti, the share registrar and outsource provider, is set to launch a platform that will pool several wealth managers’ back office functions, in response to increasing regulatory and operating costs in the industry.

A handful of UK-based wealth managers and retail stockbrokers, who did not want to be named, are close to agreeing which back office functions they would outsource to the platform to cut costs.

“The back office is no longer a differentiator [in the marketplace]. The back office is becoming commoditised,” said Mark Taylor, managing director at Equiniti Investment Services.

Mr Taylor said the platform would offer everything from custody and settlement to tax reporting, but would cater to requests from individual wealth managers considering using the platform.

The move comes as the wealth management industry faces a growing regulatory burden, and corporate stockbrokers are in parallel discussions about merging their back offices.

The recently introduced Retail Distribution Review has forced wealth managers to make fees for their services explicit and set new exam requirements for their staff. Compliance costs relating to RDR even led to some companies raising their minimum investment levels for clients.

Other regulation, such as the foreign account tax compliance act (Fatca), has also raised the costs of compliance for some wealth managers.

Mr Taylor said the platform would be a “cost-effective solution for medium and smaller players in the marketplace,” reducing their back office costs by about 25 per cent. He added that it would launch in the next few months.

However, he acknowledged there were still barriers to persuading wealth managers to outsource such functions to the platform, including assuring wealth managers that they would retain oversight of their back office.

“Demonstrating oversight to the Financial Conduct Authority is probably the most important thing for many of [the wealth managers],” said Mr Taylor.

Some companies have also expressed doubt that pooling and outsourcing their back office is the best way to cut costs, and is worth the risks.

Ian Gorham, chief executive at Hargreaves Lansdown, the investment platform, said: “Looking after people’s money is too important a responsibility to outsource to someone else.”

Brewin Dolphin, which has kept “virtually all” of its back office functions in-house said it has been developing its own software system to rein in costs.

While Rathbone Brothers said it had not yet been approached by Equiniti, it has kept its back office in-house to control it closely.

Andy Pomfret, chief executive of Rathbones, added: “Although we’d never rule [the platform] out completely, we’d let a few others try it out first.”