Platforms have been one of the biggest game changers in the financial advice industry, opening up access to a wide array of investment products to advised clients.
But positive attitudes towards providers are on the decline according to a Seccl survey, which found 69% of firms are considering parting ways with their platform.
Seccl found 68% of advice firms said their platform provider focuses more attention on winning new business than servicing existing clients and 74% agree that their teams must often perform tasks that they would expect their platform to do for them.
The report added that the advice market is “seemingly on the cusp of significant switching activity”.
Unhappiness
IA contacted Ardan International, Praemium and AJ Bell to find out if the adviser/platform relationship has hit an inflection point.
James Parsons, head of sales at Ardan International, said: “Overall, we feel advisers are happy with platforms and can see how platform technology can significantly increase efficiency. Advisers welcome a simple and transparent structure that mirrors the type of proposition found in more mature jurisdictions.
“The use of platforms has grown significantly in recent years as propositions continue to develop and advisers are able to address specific financial planning needs.”
Mark Sanderson, managing director – UK and international at Praemium, said: “I expect there are a lot of advice firms that would like to see improvements to their platform’s service and functionality. From what I’ve heard, when talking to advisers, is they are looking for better admin, better strategic alignment, a voice with a key supplier and a sense of shared responsibility.
“But they don’t want a huge increase in costs, risk and regulatory overhead. That’s what comes with the adviser-as-platform model, and it’s not talked about enough.”
Offering
Platform switching is a big decision for advisers to make – choosing the wrong provider could be disastrous.
Sometimes it may be better the devil you know, as IFAs often fail to see the complications associated with switching platform and may not appreciate what the platform provider actually does for them.
Parsons said: “We find that, as conversations develop and become more detailed, advisers recognise how technology can benefit their business efficiencies.”
Other areas in which they provide support are by providing investment management tools, assisting with client segmentation, using digital processes to lower risk, fulfilling regulatory requirements and changing adviser revenue streams, he added.
Concerned?
But overall, an adviser knows when it is the right time for a change.
However, if the Seccl survey is right and 69% of firms are ready to switch platforms – what does this mean for the platform industry?
AJ Bell’s Charlie Musson said: “The advised platform market in the UK continues to grow rapidly with advisers placing £86.3bn ($112bn, €104bn) of client assets on advised platforms last year.
“This growth reflects the importance platforms now play for advisers and their clients, not just as a place of safe custody for those assets but as a provider of tools and investment solutions that help advisers manage their client portfolios, as well as mobile apps that help advised clients feel more engaged with their investments.”
Parsons added: “We feel the platform market has a very positive outlook for a number of reasons. Jurisdictions in which advisers operate, where products are regulated and where third parties such as trustees and investment houses are based, are continuously going through regulatory change.
“The world is becoming more regulated. Covid and the acceleration towards digital solutions has benefitted platforms too.
“As we look to mature jurisdictions, such as the UK, it’s clear that the direction of travel may well mean a fee-based platform proposition will continue to be a significant part of an adviser’s product arsenal. However, there are fundamental, but significant, requirements to operate as an ‘international platform provider’.
“Systems/technology will be key to this, to handle mass adoption of platform, an adviser’s chosen platform will have to ensure it can successfully service multiple currencies for example. Providers will also need to be agile enough to adapt to multi-jurisdictional requirements and automated enough to ensure they are competitive.”
Setting up on their own
Another problem facing platforms is not only are firms looking to switch – but some are even contemplating adding their own in-house platform.
In August 2021, Seccl and the Lang Cat found 44% of advisers are considering investment platform ownership.
Praemium’s Sanderson said: “There are firms that have the operations capability, the deep pockets necessary to spend on customisation of the front end, and the risk appetite for doing more of what it is that platforms do. They should absolutely go down that path if it makes strategic sense. But they need to go in with their eyes wide open.”
Musson added: “Given the importance platforms play in an adviser’s business, it is only natural that they would consider whether they should run their own platform in-house. Some will be able to do that, but it is a big commitment of money, time and resource.
“As platforms have become more important within the industry, the regulatory capital requirements have grown, so not only will advisers have to invest significantly in the build and ongoing development of the platform, but they will have to hold enough capital on their balance sheet to satisfy the regulator.
“They will also have to invest time and resources in the admin that needs to sit around a platform to service their client needs and there will be no one else to point the finger at when the needs of their customers evolve and further development is needed, or where the occasional IT gremlin raises its head.
“The key question will be whether advisers are in a position to manage the many day-to-day tasks and associated costs that come with operating a platform while also looking after the interests of their clients.”
