From Special Report:
Revealed: Investment Adviser Platform Award Winners
Investment Adviser’s second annual platform survey reveals the best-performing platform players
With more than £190bn in assets under administration and roughly 30 providers, the UK’s wrap and platform industry is already one of the big beasts of the investment world.
The report on platforms in last week’s issue of Investment Adviser highlighted the debate among advisers and providers alike as to how the platform industry will develop. Many suggested that consolidation or mergers and acquisitions is a likely outcome, although some suggested the industry could yet expand further before that occurs.
When it comes to brand awareness and perceived financial stability, advisers still favour some of the larger providers - Cofunds, Fidelity FundsNetwork, Skandia Investment Solutions (soon to be rebranded as part of a restructuring at parent company Old Mutual) and Standard Life. However, the second Investment Adviser Platform Awards, which recognises the top-performing players in the marketplace, reveals that the smaller players are gaining traction, particularly when it comes to technology and service.
The top platforms of 2012
This year’s award for Platform of the Year was dominated by more established players. Skandia Investment Solutions won the top honours for 2012, just ahead of Transact, which was highly commended by advisers. Standard Life was also commended.
The award confirms these groups’ respective standing in the market, even in the face of recent figures that confirmed Cofunds had overtaken Skandia as the largest platform in the UK by assets under administration.
Although in a different order, this result mirrors that of Platforum’s leaderboard for the first quarter of 2012, which saw Transact take the top spot, with Skandia in second place and Standard Life in third. The leaderboard examines platforms’ overall performance in terms of financial strength, percentage increase in assets under administration and price on a quarterly basis, as well as reviews from roughly 1,800 advisers.
Investment Adviser’s award for Best Newcomer, which includes only those platforms that launched into the marketplace within the last five years, goes to Novia Financial, which has £1.1bn in assets under administration as at the end of March this year, according to the Platforum. When compared with the first quarter in 2011, this is a 10 per cent increase in assets under administration.
Chief executive and co-founder Bill Vasilieff told Investment Adviser that, as part of the firm’s growth plans, he is looking to buy up books of business and eventually float on the stockmarket. “I think everything is a takeover target at the end of the day. But we’re not looking to be taken over. We’re looking to build this business up – and float it in due course,” he explains.
Novia was also commended in the award for DFM Platform of the Year, pipped to the post by Parmenion, which took the top spot, and Nucleus, which came second. The use of discretionary fund managers (DFMs) by advisers has increased significantly in recent years, particularly as the implementation date of the RDR grows closer. However, the FSA recently threw a small spanner in the works.
In July a paper issued by the regulator instructed advisers to avoid “shoehorning” clients into outsourcing products that are not an exact match to their needs. Furthermore, in August the FSA announced that it was set to clarify that advisers cannot gain commission from DFMs on recommendation.
This sparked concerns within the industry that advisers use of discretionary services would fall as a result. However, Paul Boston, director of sales at Novia, dismissed these concerns, saying that the change would not see advisers abandon DFM services. He added that Novia would be appearing in a series of roadshows for advisers this autumn to help them prepare for the implications of new regulation for advisers.
Behind the scenes
All-round achievement and ability to adapt to new regulation are undoubtedly crucial advantages when it comes to marketing platforms to advisers. However, what is increasingly apparent from the results of Investment Adviser’s second annual platform survey (see page 30 for the full results) is that advisers have particular concerns about specific aspects of the industry. Furthermore, the nature of these concerns is changing. Worries over the financial stability of fund supermarkets and wrap platforms has been replaced with issues surrounding the technological capabilities of the product.
Overall, Skandia Investment Solutions was voted by advisers as the provider with the best technical support. This category takes into account things like the reliability of systems, online reporting material, guidelines and, of course, the ability to solve problems quickly. Fidelity FundsNetwork was highly commended and Standard Life’s platform was commended.
But, of course, those providers with more assets under administration will undoubtedly encounter increasing issues from their clients. For example, one respondent to the survey claimed that Skandia’s valuation tool doesn’t “produce a valuation of how much is invested after the charge and how much is in each of the funds on one page” and another suggested that fund switches on FundsNetwork are not ‘pre-funded’.
One adviser was concerned about how platforms might unbundle their charges from those of fund managers and advisers under the RDR and how providers with bundled charges are planning to become more RDR-friendly.
In a document sent out to advisers in April 2012, Skandia marketing manager Nick Dixon outlined plans to launch a more flexible charging system for advisers on the platform in the fourth quarter of 2012.
“This will offer advisers significant flexibility, with monetary or percentage options enabled across four types of fee: initial, ongoing, fund switch and ad-hoc fees,” he wrote. “You [advisers] will also have the option, though no obligation, to convert Skandia Investment Solutions clients to adviser charging within Skandia’s existing charging structure for in-force business.”
Cofunds, FundsNetwork and Standard Life have also announced details of their unbundled pricing structures as they move towards adviser charging systems. On its platform Fundzone, for instance, Standard Life is scrapping initial fund charges and removing the platform’s 0.25 per cent charge for switching between investments. Instead, it will be on a tiered system ranging from 0.2 per cent to 0.35 per cent and no annual fee.
Clarity and breadth
However, in Investment Adviser’s analysis of the impact of regulation on charges last week, Ed Dymott, head of commercial at Fidelity International, warned that advisers still need to pay attention to the service they are receiving for the price, rather than just the price itself.
As the FSA has told independent advisers they must consider the whole of the investment market after the RDR, a broad range of products will be a crucial component of many platform services in future. In the awards’ Most Diverse Product Range category, Skandia Investment Solutions once again picked up the gong.
Even Skandia, however, still does not offer advisers access to the whole of the retail investment market or a complete sub-set thereof. Most particularly, one adviser highlighted a concern over the platform not currently offering access to exchange traded funds (ETFs). A survey of 840 advisers carried out by Skandia specifically on advisers’ use of ETFs, however, reveals that advisers’ familiarity with ETFs is still relatively basic. More than a third of them have little or no understanding of the structure of synthetic ETFs in particular and that more than 420 of the respondents have little or no understanding of asset-based ETFs. Interestingly, the survey shows that advisers favour open-ended index tracking funds instead of ETFs when putting together a portfolio of passive investments.
Particularly as the RDR is designed to make the industry more transparent to advisers and their clients, transparency will also be a key part of any platform’s service to its clients in future - which Investment Adviser has recognised in its award for Most Transparent Platform. The winner in this category was Transact, with Novia and Nucleus both being highly commended by advisers. Cofunds received the commended accolade in this year’s awards.
Interestingly, those voted ‘most transparent’ are the smaller players in the marketplace, don’t have the support of a life company and have been increasingly vocal about how they are structuring their models for a post-RDR world. However, a survey carried out by SCM Private, a London-based investment management company, found that 64 per cent of IFAs didn’t think that the RDR would improve transparency in the financial services sector. Of the 100 IFAs that took part in the survey, 78 per cent said that fund managers should disclose the full breakdown of all fees incurred when investing a client’s money.
Fund manager’s choice
This year, in addition to the awards mentioned, Investment Adviser also asked fund management firms to vote on which platform they favoured. The winner of in this category was Nucleus. Launched in 2006, Nucleus is majority-owned by participating IFA firms and is structured so that all new IFA firms that join Nucleus subscribe for equity and therefore naturally participate in any development of the business going forward.
The latest development on the platform, in August of this year, saw Nucleus enhance its DFM proposition which basically allows DFM portfolios to be managed centrally on the platform - administration included. From this, the adviser retains full control of the client and has the ability to choose to work directly with specific DFMs or, alternatively, outsource multiple client accounts using a single model portfolio.
Barry Neilson, business development director at Nucleus says: “By ensuring that a client’s assets are managed centrally, with all admin being performed in one place, we are making the traditional adviser/DFM relationship more effective and efficient for the benefit of all. We are committed to providing them [advisers] with the greatest possible choice and flexibility when it comes to managing investments.”
Overall, both fund supermarkets and wrap platforms are working hard to ensure that advisers are able to fullfil the FSA’s requirements when it comes to their clients - particularly in reference to being able to justify the use of a particular platform. But in an industry that is continuously evolving, the results of next year’s Investment Adviser’s Platform Awards could paint a very different picture.
[FOR THE RIGHT HAND SIDE]
Platform of the year -Skandia Investment Solutions
Highly commended: Transact
Commended: Standard Life
DFM Platform of the Year - Parmenion
Highly commended: Nucleus
Best Newcomer - Novia Financial
Highly commended: AJBell SippCentre
Commended: James Hay
Best Platform Adviser Service - Skandia Investment Solutions
Highly commended: Standard Life
Most Transparent Platform - Transact
Highly commended: Novia Financial and Nucleus Financial
Best Platform Technical Support - Skandia Investment Solutions
Highly commended: Fidelity Fundsnetwork
Commended: Standard Life
Most Diverse Product Range - Skandia Investment Solutions
Highly commended: Cofunds
Commended: Fidelity Fundsnetwork and Standard Life
Fund Management Choice - Nucleus