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Is less more when it comes to the platform industry?

With an increasing choice of products to invest in and wraps or platforms to use, is it a case of less is more for advisers?

By Jenny Lowe | Published Sep 10, 2012 | comments

In 2004, an American psychologist by the name of Barry Schwartz authored a book entitled ‘The Paradox of Choice – Why More is Less’, arguing that, by eliminating choices, anxiety among consumers when shopping is significantly reduced. Similarly, a 2010 study by Stanford University’s psychology department suggests that, faced with too much choice, consumers end up unhappy regardless of the choice they make.

With almost 30 platform providers available, and amid increasing pressure from the FSA for advisers to justify their platform choices, is it a case of less is more when it comes to the platform industry? In such an overcrowded market, something has got to give. Holly Mackay, managing director at Platforum, admits that “logically” there are too many adviser platforms in the UK. However, she isn’t convinced that consolidation among platforms will come from an increase in merger and acquisitions activity, claiming that it is “hard to actually value a platform”.

Seeing as consolidation does not appear to be imminent, advisers will remain barraged with a bewildering variety of choice. Investment Adviser’s second annual platform survey and report – online at www.ftadviser.com/IA – reveals that advisers remain concerned with platforms’ ability to provide decent reporting tools, a good standard of product literature and a wide choice of investment vehicles to choose from.

Even structured products, which face questions over their suitability for retail investors, made an appearance, with 16.4 per cent of advisers admitting they would use a platform that listed them over one that excluded them.

What is clear from our report is that there is an increasing choice of a) products to invest in and b) wraps or platforms to use. If the psychologists are to be believed, advisers’ anxiety over platforms – and over whether they are choosing the right platforms after RDR – will soon reach boiling point.

Jenny Lowe is features editor at Investment Adviser