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Home > Investments > Wraps & Platforms

From Special Report: Platforms - September 2012

Survey: Big isn’t always better when it comes to platforms

Investment Adviser’s second annual platform survey shows advisers aren’t swayed by big name providers

By Jenny Lowe | Published Sep 10, 2012 | comments

Advisers’ use of investment platforms has evolved considerably since they were first introduced to the market in 2000. Instead of just using one platform, advisers now use multiple platforms to cater for their clients’ needs. In some cases, they don’t use platforms at all.

Last year, the FSA stated that it expects an “independent adviser to be able to demonstrate why using a particular platform is suitable for an individual client”, implying that advisers must use multiple platforms or even no platform at all if necessary. Investment Adviser’s (IA) survey of IFAs (see below for methodology) reveals that the average number of platforms used by IFAs is three, with 63.3 per cent preferring to do business with those that are not tied to a large company or bank.

Secondary platforms

Overall, research from The Platforum shows that 36 per cent of advisers are reconsidering their use of a secondary platform to sit alongside their primary platform.

According to the report, a primary platform is defined as that which holds the majority of an adviser’s assets in monetary terms.

Holly MacKay, managing director at The Platforum, explains: “Most adviser firms actually have client assets on three platforms, but this is often a result of acquisitions and decisions made a long time ago.

“We think some of this ‘legacy’ platform business is likely to shift in 2013 when re-registration becomes easier. Having historical platform positions is very different from making the active, tactical decision today to use more than one platform to suit different customer segments. It is this decision making – and re-visiting platform use and adoption - which we see more of today.”

The research suggests that Nucleus and Standard Life tend to gain most traction with advisers who use them on an almost exclusive basis - 71 per cent of Nucleus advisers interviewed by The Platforum use the business as their primary platform and 64 per cent of Standard Life’s adviser clients said the same about that platform.

Ms Mackay suggests that there is a growing opportunity for platforms positioning themselves as a secondary platform.

She says: “Advisers we speak to have much clearer – and usually much simpler – requirements from a secondary platform. They have a clear job in mind and functionality and value for money are the main drivers. Forty-eight per cent identified cost issues as the single most important factor and 41 per cent identified functionality. Many of the ‘nice to haves’ are just not relevant.”

However, while The Platforum research identified that intentions about transitioning business from one platform to another are higher than ever, with 24 per cent of advisers reporting that they were either likely or very likely to change their primary platform over the next 12 months, the IA survey found the opposite.

Our results show that 88.84 per cent of advisers don’t plan on switching their platform provider, with just 4.6 per cent saying it was a possibility within the next 12 months.

Administrative and technical support

When selecting platforms, administrative support remains key for IFAs. A broad industry survey carried out by Defaqto found that advisers prioritise the speed at which new clients’ applications are processed above any other aspect of service when it comes to selecting the right platform.

Fraser Donaldson, Defaqto’s insight analyst for funds, says: “Most advisers will be concentrating on becoming ‘RDR ready’, and part of this will involve moving suitable clients to a platform. Most advisers will want to have their clients in place on the most suitable platform in time for RDR implementation, so it is no wonder that the speed of client processing is of the essence.

“Determining the speed with which key administrative tasks are carried out should be an essential part of due diligence for advisers researching potential product and service partners. All platforms have seen considerable growth in assets, and how they are coping with increased scale administratively is crucial.”

Both the IA survey and research from consultancy Defaqto also show that while a platform’s technical support remains important, it is less critical than last year, as advisers have familiarised themselves with those platforms they use often.

In a similar survey in 2011, ‘ease of doing business’ was rated as the most important aspect of provider service, but this was found to be the fourth most important in this year’s survey.

Mr Donaldson says: “System reliability is fundamental to platforms as they are after all technological solutions. There have been no great disasters reported in the short history of platforms, but talking to existing users among an adviser’s peer group may well elicit where the annoying niggles may lie.

“If there were excessive or significant system problems, this discipline would soon be ranked at number one. If the system is unreliable it defeats the object of employing one as an aid to increasing investment administration efficiency.”

Skandia, Cofunds and Fidelity FundsNetwork were identified in the IA survey as those that offered the most reliable systems, with Standard Life, Axa Elevate and Aviva also scoring reasonably well. However, it was these providers that also garnered the most issues among those surveyed, with respondents highlighting issues such as certain products not working on earlier versions of Internet Explorer, charting problems and regular technical irregularities.

When asked specifically about the standard of product literature available, it was again the larger providers that came out on top. At 16.24 per cent, Skandia was viewed as the provider offering the most comprehensive.

In a turn around from last year’s survey however, there was a significant increase in those advisers that valued the service provided by some of the smaller players in the marketplace. Parmenion, Novia Financial, Transact, Nucleus and Ascentric scored consistently well across the survey, particularly in areas such as online reporting capability, quality of website content and financial strength.

What is clear from the survey this year is that advisers are becoming increasingly aware that big is not necessarily better. In an industry that has been dominated by ‘the big five’ for the best part of a decade, perhaps the time has come for the smaller players to get a slice of the action.

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