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

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.