Choosing an Adviser Platform

October 2016

Choosing an adviser platform , October 2016

ABOUT THE AUTHORS

Miranda Seath is a Senior Researcher at Platforum where her focus is on the adviser platform market, trends in financial advice and fund distribution. Miranda has extensive experience in researching retail financial services. Before joining Platforum, she was Head of Marketing Communications Services at Marketforce Business Media helping clients to develop content and thought leadership on strategic issues in financial services. Miranda read Ancient and Modern History at St Hilda’s College, Oxford and has an MA in International Studies and Diplomacy from SOAS.

Andrew Ashwood is a Research Associate at Platforum where he focuses on the adviser platform market and platform pricing, as well as supporting the quantitative research effort across all of Platforum’s publications and bespoke projects. Previously, he gained experience working with data and analytics at one of the UK’s largest retail banks.

Andrew has a degree in Economics from the University of Warwick with a focus on econometrics, statistics and behavioural economics.

Danby Bloch is co-founder of Taxbriefs Financial Publishing, chairman of London IFAs Helm Godfrey and is a former director of wrap operator Nucleus Financial Group. He is also a regular speaker and has written and edited a number of books on financial planning.

Danby is a consultant to the Platforum team. His focus is on events, publications as well as general platform and investment policy and industry issues.

Danby was Chair of Governors of Oxford Brookes University and subsequently its Pro-Chancellor. He is currently chair of the Oxford Playhouse. Danby read Politics, Philosophy and Economics at Oxford University.

Choosing an adviser platform , October 2016

1 Initial decisions when choosing platforms 5

1.1 Model portfolios 5

1.2 Discretionary fund managers (DFMs) 5

1.3 Client segmentation 5

1.4 On-platform or off-platform? 6

1.5 Who will pay for the platform? 6

2 Changing to a new platform 7

2.1 Switching platforms 7

2.2 Choosing a platform for new business 8

3 Platform charges 11

3.1 Key variables in determining charges 11

3.2 Modelling charges using scenarios 11

3.3 Special deals 15

3.4 Advisory firms’ ‘in-house’ platforms 16

3.5 Future charging expectations 16

4 Other key platform features in selection 18

4.1 Service 18

4.2 General web usability 19

4.3 Functionality – tools 21

4.4 Investment choice 22

4.5 Tax wrapper choice 23

5 Platforms’ financial sustainability 24

5.1 Size 24

5.2 Market share 24

5.3 Profitability 25

5.4 Growth in assets under advice (AUA) 25

5.5 Gross and net sales 27

6 Overall assessments of platforms 29

7 Platforum’s comments on individual platforms 33

8 Pricing Directory 42

9 Appendix 55

9.1 Notes on individual platforms 55

10 List of tables and figures 56

10.1 Tables 56

10.2 Figures 56

CONTENTS

Copyright © Centaur Communications Ltd 2016. All rights reserved.

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Choosing an adviser platform , October 2016

INTRODUCTION

The aim of this report is to help financial advisers decide on a platform strategy for their businesses and

then select the right platform (or possibly several platforms) to meet their requirements. This process is

generally described as ‘due diligence’.

The importance of platforms to advisers

Platforms remain one of the key components of an adviser’s investment proposition and have come a long

way since they were first introduced to the UK adviser world at the start of the century.

Platforms provide much of the machinery for advisers to buy, sell and hold their clients’ investments.

Increasingly platforms have taken the place of life offices (although some platforms are parts of

insurance companies) as providers of pension, life assurance bonds and ISAs.

They are typically the main way that advisers report on investment performance to their clients and

provide them with continuing picture of the whole of their invested wealth.

Platforms also provide the means by which advisers typically charge their clients for their services post-

RDR.

Advisory firms crucially depend on platforms as some of their main business partners and so the choice of

platforms is a very important decision for them. We hope that this report will make their job of reviewing

existing platform relationships and choosing new ones easier and more effective.

The FCA’s view of due diligence

The regulator has also made it clear that due diligence of platforms is an important function for advisory

businesses, especially those that retain the status ‘independent’. In recent FCA reports, the regulator has

found evidence of status quo bias and familiarity in advisers who cling to their old platforms choices

regardless of their merits.

In a different context Hilaire Belloc urged children to “Stay close to nurse for fear of meeting something

worse.” The FCA clearly does not adhere to this adage and expects advisers to undertake serious due

diligence processes – not just exercises that conveniently confirm that the original platform choice was the

right one all along.

Platforum’s research

The information in this report is derived from Platforum’s continuous monitoring of the platform market

that we use to generate our regular bulletins and market studies to our subscribers. Our approach is to:

Carry out regular surveys of hundreds of adviser firms

Hold qualitative research meetings with advisers, DFMs, fund managers and other platform

stakeholders

Engage the platform industry in an ongoing conversation about new developments

We have distilled many pages of this information into a report that we hope you as advisers will find of

practical help in your due diligence processes. We hope it will become a regular publication for the market.

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Choosing an adviser platform , October 2016

2 CHANGING TO A NEW PLATFORM

The FCA has been vocal about advisers’ ‘status quo bias’ when conducting platform due diligence. Its

thematic review, TR16/1 Assessing suitability: research and due diligence of products and services published

in February 2016, finds that advisers are prioritising their own needs ahead of their clients: "in some cases,

firms placed the level of service they received ahead of the level of service received by the client."

The implication is that advice firms are reluctant to change platforms, even if a more suitable platform for

their clients is available.

Whether using a new platform, switching assets between platforms or maintaining the status quo, due

diligence must take into account how well the platform will serve the client’s needs. You should be mindful

of the FCA’s thematic review when evaluating whether to place assets on a new platform or to transfer

existing business from one platform to another.

2.1 Switching platforms

When it comes to switching between platforms, cost has been less important to advisers than service.

Reasonably, advisers argue that competitive pressures have made costs converge somewhat in the past

and will probably continue to do so.

The reasons for switching assets away from a platform mainly have to do with service levels, usability and

functionality. It is only after these issues are satisfied that cost and fund choice come into play (see Figure

1).

Price differences between platforms are often not large enough to prompt a review of switching platform

use. Few advisers would decide to move the flow of their new business from one platform to another for

less than 10 bps. Where the difference in prices is more than 10 bps between two platforms that meet the

adviser’s requirements, the chances of switching new business are greater.

Figure 1: Top five reasons for transferring assets away

Source: Platforum, October 2016

What has prompted you to think about transferring assets away from a platform?

Base: 82 advisers transferring away assets

68%

49% 48%44%

32% 30%26%

22% 21% 20%16% 15% 15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1st 2nd 3rd 4th 5th

Order of importance of factorsSample

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Choosing an adviser platform , October 2016

2.1.1 Considerations when switching platforms

The decision to transfer assets from one platform to another involves these main considerations:

It may absorb you and your staff in more work so consider the costs that a client may be prepared to

pay for in part or in full.

When clients transfer, they could encounter tax issues – especially if the new platform requires the

encashment of a bond or the disposal of funds subject to CGT.

You could find that some clients will be out of the market for some days regarding some investments.

Check the typical processing times of the platform and whether the platform is able to pre-fund.

You would need to find out the level of accuracy with which the platform has previously re-registered

assets.

It would also require an assessment of whether the new platform supports the same funds, investment

products and tax wrappers as the old platform.

The new platform may not offer the same advantageous terms for certain funds as the old platform.

We understand that exit charges are no longer levied by platforms and shouldn’t be a barrier to switching.

Faced with these considerations, it is hardly surprising that we have discovered that the criteria that

advisers generally use for switching between platforms are more demanding than those they employ for

changing the direction of their new business flow.

2.2 Choosing a platform for new business

Like most advisers you may have built up a view of your ideal, perfect platform. And it is this platform that

you could be looking for when choosing a platform for new business rather than deciding to switch out of

an existing platform.

Most advisers’ criteria for selecting a platform for new flows of funds are in the following broad order of

importance, which you could find helpful:

1. Low charges

2. Service

3. Investment choice

4. UsabilityFinancial stability

5. Functionality

Sample

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