Nearly half of advisers surveyed in Scottish Widow’s annual Investor Confidence Barometer are worried a fund platform could fail within the next three years.
In the survey, which asked 200 advisers what the top issues were that arose in due diligence checks, that need to be carried out to comply with the FCA’s Consumer Duty rules, some 35% cited financial strength (below service at 52% and price at 47%).
At the same time, more than four in 10 (41%) of those advisers surveyed reported they would exclude a platform from their shortlist if it had a ‘B minus’ financial strength rating or lower, while 47% said they worried a platform could financially fail within the next three years.
“It should come as no surprise that the financial strength of platforms is a top priority for advisers, as it’s the pillar on which their business is based, and trust is formed with clients,” said Ross Easton, head of platform proposition at Scottish Widows Platform.
See also: Schroders adviser survey finds big uptick in use of multi-asset funds
“This is also in line with the expanded mandate for assessing foreseeable harm from the FCA to ensure client money is protected,” he added. “Advised consumers are increasingly engaging with their providers and demanding the strongest assurances that their money is safe.
“Financial strength also impacts a platform’s ability to invest, with the advice market now expecting continuous innovation to keep up with intense competition. We’re continuing to roll out our £150m investment programme, working behind the scenes on enhancing our technology to give advisers everything they need digitally in this rapidly evolving market.”
Despite the fear of financial collapse of a platform, the survey showed a division among advisers over the benefit of merger and acquisition within the sector. Just over half (52%) of those surveyed disagreed with the notion that ‘consolidation and M&A in the advice industry is a good thing consumers’.
Meanwhile advisers were split of whether the platform market is oversupplied, with 40% agreeing that it is, and 39% disagreeing.
