PlatformsApr 22 2014

Platform view: Everyone’s a winner

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It’s now more than a year since the Financial Conduct Authority was created. It therefore feels like a good time to reflect on how our new regulator has performed since its creation.

It is encouraging to see evidence of culture-led reviews coming from the FCA, as opposed to box-ticking compliance exercises which bring little to the table but unnecessary paperwork.

It is certainly leaving no review unturned. The FCA’s recent contentious threat to shake up the life insurance sector is yet more evidence of this – and it’s no easy task.

One thing the FCA has to be applauded for is bringing platforms and the rules governing them into clear focus.

In its platform paper PS13/1 last April, the FCA set out guidance for payment rules between fund managers and platforms, lifting the lid on the cosy collusion that had previously existed between certain market participants.

The rules also spelled out a ban on advisers using a platform service unless it can meet key due diligence criteria. This month, a year later, the rules came into force.

The new rules reflect a continuing shift in the balance of responsibility from provider to adviser in ensuring regulatory responsibility is met.

The changes have increased adviser obligations: the onus is now on them to ensure the platforms they use adhere to the new rules and are operating in a manner that banishes any form of commercial bias from the advice process.

Advisers must now ensure that, before recommending a platform to clients, it is playing by the new rules. This reinforces the fairness and transparency that the RDR introduced last year.

This increased transparency offers advisers a fantastic opportunity to focus solely on delivering the most appropriate client outcome, while simultaneously improving consumer confidence in the financial services industry.

A major shake-up, but in reality, I suspect, the number of advisers hastily making last-minute changes to their platforms would have been minimal. Over the past few years most advisers will have greatly deepened their approach to platform due diligence, so it’s now more an evolution than a revolution.

Increased transparency is needed to boost trust in the industry and ensure investors are getting the best possible outcome, so we wholeheartedly support these changes.

Although some will find this a difficult transition, according to a recent census of Nucleus users, our advisers have prepared well, ensuring the shift was as painless as possible on April 6.

Ultimately advisers need to become a bit more cynical when selecting product partners nowadays. Clever sales and marketing literature isn’t enough – partners must perform as they say they will or the adviser will end up failing in their responsibility to use an appropriate platform.

Taking this element seriously will be rewarding for advisers, because the platform winners will be the ones taking their own responsibilities seriously and, as such, put the outcome of their customers first. Everyone wins.

Barry Neilson is business development director at Nucleus