Total platform industry costs in the UK stood GBP50 million higher than revenues in 2011 despite assets under administration of nearly GBP250 billion, according to a white paper published by technology firm Altus.
According to the report, the top 20 UK platforms increased their combined total revenue to around GBP740 million but the total expenditure for the same period was around GBP790 million.
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In a report called ‘The Platform Machine: tuning for efficiency’ Altus said that although revenue growth for some platform players has been impressive, the ‘profit lag’ must be taken seriously.
Though AUA increased five-fold in that time, average revenue as a proportion of AUA fell from 80bps to 40bps, the report revealed.
The paper, which was written by Altus consultancy director Kevin Okell, pointed to an over-emphasis on asset growth and insufficient attention to back office costs as the main reasons for a lack of profitability.
Okell said: "We see an industry allowing itself to be held hostage to a cost-base which is not only neglected but quite probably untethered and likely to gain momentum. There has been so much emphasis on asset gathering and growing the top line that the bottom line neglect is now painfully obvious.
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By GlobalData"Platforms could learn from closer scrutiny of their costs and pointed out one platform administers on average GBP2 million per employee whereas another manages GBP70 million per employee," Okell added.
