There have been some interesting developments in the UK Financial Services market since the last edition of BP went out two weeks ago.

Some people are labelling the ongoing change and transformation in the market as an Industrial Revolution – something financial services has never had.

However while it may feel like this to the many businesses under increasing pressure, we believe the changes are more straight forward than that.

In the UK it’s all about price and downward pressure on pricing. From a business perspective the issue is where do you sit along the value chain?

The new world legislative changes and economic realities are impacting businesses across the value spectrum from manufacturers to administrators to distributors and even to consumers.

There are only going to be so many, what the industry likes to call, basis points up for grabs post-Retail Distribution Review (RDR) as clients and consumers become more aware of the fees and charges they are paying and the market has to react by pricing at a level people are prepared to pay to engage with it.

In some circumstances clients may be prepared to pay high costs for access to certain products and services, but in general, the only way forward on pricing is down.

In latter half of November the big players in the platform space were given a significant boost when the Financial Services Authority (FSA) took its foot of their proverbial necks and stepped back from the brink on the subject of unbundling.

Perplexingly for the smaller wrap providers, they were dealt a blow in the same fell swoop by the regulator as it banned cash rebates back to the client through an adviser, over a requirement for these providers to issue ‘units’ instead.

Meanwhile fund managers, at least active managers, are likely to struggle in some areas of investment as cheaper packaged ETF-styled products are able to compete from a performance perspective while doing so at lower cost.

Consolidation or market exit is the real risk to some groups, whether they are pension companies, asset managers or platform providers or advice firms, as there are simply too many groups chasing too small a pool of assets (at least  in terms of the levels of revenue those assets can generate).

Elsewhere if we look at the pensions market, there is concern among some providers that NEST – the Government’s mechanism for getting low earners into pensions – could set a new benchmark for both technology and pricing.

The Government is looking to harness technology to deliver NEST, and unlike with pension companies, without the drag of having do deal with dreaded ‘legacy’ systems – NEST could therefore in theory pull the rug from under parts of the pensions sector.

Overall though the biggest challenge for the industry is in raising its game for the end consumer,.

Once consumers begin to see value and the merits of the long term benefits of engaging and saving through the financial services industry, only then can we expect them to voluntarily pay higher premiums to access the products and services on offer.

Unfortunately, for many this nirvana will come too late and long after they have left the industry…