OpinionDec 16 2014

True platform due diligence requires deep data digging

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For far too long, what many people in this industry refer to as ‘platform due diligence’ is in fact ‘platform selection’.

They tend to focus exclusively on price and functionality. While these are important, platform due diligence in its truest sense should include a critical assessment of the long-term viability of the platform.

Due diligence is not something you do to keep the regulator happy; it is what you do to protect your clients and your business.

One way to assess the long-term sustainability of a platform is to look at profitability. The reality is that loss-making platforms are more likely to be acquired, closed or exit the market, leaving advisers (and potentially clients) to pick up the pieces.

Proper due diligence requires some serious data; you need to trawl through accounts and hundreds of data points to get a good picture of the financial health of a platform.

Armed with this information, you then need to ask senior management some uncomfortable questions. For instance, are there adequate profits to invest in services and technology?

Hopefully such queries will spark a meaningful, if challenging, dialogue between platforms and adviser businesses, not to mention challenge platform providers to find ways to improve efficiencies.

Abraham Okusanya is founder and director at FinalytiQ