INN8 sees further consolidation in investment platform market

INN8 Executive Mickey Gambale

Financial-services group INN8 expects merger and acquisition activity in the investment platform industry to accelerate as companies seek to bulk up in size and improve earnings.

“South Africa has space for two, maybe three, dominant platforms given the size of assets in the country,’’ says INN8 Executive Mickey Gambale. “Platforms cost a significant amount of money to build. It helps if you have a significant scale to make real profits. The South African market should start consolidating.”

Some deals in the local industry have already been set in motion.

FNZ, a global wealth management platform, in May last year completed the acquisition of South African third-party administration firm Silica from Ninety One. In December, Sanlam agreed to buy Alexander Forbes’ client administration business for R200 million and place the company under its Glacier brand. Sanlam last year also reached a deal with Absa to acquire the bank’s platform unit for Glacier.

INN8 launched its retail investment platform in September last year after four years of development – building it from the ground up using the latest upgradable technology. Among the country’s top platforms, it allows financial advisers to trade without restrictions on behalf of their clients, provides automatic reconciliation tools, simple-to-understand investment proposals, real-time regulatory compliance, and a wide selection of clean-priced funds advisers and their clients can choose from.

As for its expansion, INN8’s investment platform can rely on its relationships with Standard Bank, Africa’s largest lender, and the bank’s insurance unit, Liberty, to boost its assets under administration. INN8’s platform can achieve this by migrating legacy assets onto its modern platform – without needing to make acquisitions, Gambale said.

“We are uniquely positioned,” he says. “If we play our cards right, we should be among the two strongest players in the market.”

Linked Investment Service Providers (LISPs), which manage investment platforms, had assets under administration of R1.62 trillion at the end of the first quarter, a 1% decline from the prior quarter, following a drop in markets and a slowdown in net new business, according to data compiled by the Association for Savings & Investment South Africa from Lisps which supply information to the industry body. That compares with total assets in Collective Investment Schemes of about R3 trillion.

Platforms vary from those targeting boutique asset managers and large asset managers to those seeking to accelerate the development of women. INN8’s platform has been built entirely around the needs of wealth managers – from simplifying their administration services to improving the quality of their financial advice to streamlining research on a client’s portfolio or creating model portfolios.

Not only are there too many platform providers, but a potential global recession, a moribund local economy, and uncertain financial markets deepen the need to consolidate, Gambale said.

“This country is not big enough for all these players,” he says. “It is too expensive. Your growth will come through building scale and then creating efficiencies within that scale. As your size swells, you can drive your prices down and widen your market as you create better value for consumers.”

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