Platforms and the brave new world: David Ferguson, Nucleus
Platforms did not need the Retail Distribution Review to convince advisers of their merits - increasing numbers of intermediaries were migrating their businesses and clients on-platform in any case - but the new rules is nonetheless likely to exacerbate the sector’s growth trend.
But while the rule changes will provide a boost for business, debates around how the advice market is going to evolve are also prompting focus to turn to services offered through platforms and how these will work in the post-2012 world.
There have recently been some high-profile spats over several key issues, ranging from rebates to single platform use. Most recently there was a clash on Twitter - where else in today’s social media age - involving Novia and Skandia regarding the regulator’s stance on discretionary fund management.
As reported in FTAdviser’s sister paper, Investment Adviser, Graham Bentley, head of proposition at Skandia UK, said that “off-the-shelf” DFM services were “dead” following the release of an FSA paper warning against shoehorning clients into one-size-fits-all solutions.
The comments were labelled as “nonsensical rubbish” by Bill Vasilieff, chief executive at Novia, who said: “IFAs outsource asset choices and management to DFMs and it is absolutely acceptable and regarded as good practice”.
I think what is slightly dangerous is when the costs of a platform are being subsidised by the investment management proposition
David Ferguson, chief executive at IFA-owned wrap platform Nucleus, warns that it was “probably dangerous” to make sweeping generalisations.
“I don’t think off the shelf DFM solutions are dead. I think any IFA is obligated to consider the client’s circumstances and I don’t think you can draw a broad brush conclusion on whether one model is right or wrong at a sort of macro-level.
“I think there are some people for whom a model portfolio ran by DFMs are entirely suitable proposition, just as the right answer will be managed funds for some people. I don’t think you can make any sweeping generalisations to be honest.... that’s probably dangerous.”
On the subject of trends within the industry that are perceived as ‘dangerous’ the conversation turns to unregulated investments, which have come under fire recently following a string of high-profile cases involving significant losses for investors.
This debate has been focused most prominently of self-invested personal pensions firms, with most recently the court-appointed receiver of an insolvent bio-fuel investment company that is under investigation by the Serious Fraud Office revealing that 2,000 investors may have lost around £40m through 12-15 Sipp providers.
Clearly, the debates around the facilitation of such investments extends beyond Sipp providers. However, Mr Ferguson believes both that unregulated investments “can have a place in the market” and that ultimately responsibility falls down entirely to the adviser.