PlatformsMar 14 2012

Model portfolios

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The platform industry has mushroomed over the last few years. There are now 25 platforms in the sector, according to Platforum - from just nine seven years ago - and assets under administration have doubled over the past six years.

In addition, the financial crisis appears to have had little effect. Since 2008, the amount of assets administered by platforms has grown to £176bn, from £63bn, dipping by £5bn during the economic problems.

It would appear that platforms are becoming more accepted. Tom Sheridan, chief executive of 7IM, said: “Platforms have become a standard way of doing business now for clients, and for investments in general. Using a platform has become the standard means of operating but not surprising we’re finding more platforms popping up.”

One of the big drivers is the motivation by life offices to set up their own platforms, prompted to protect their legacy business.

Mr Sheridan said: “They have a back book of business to protect. If they don’t have a platform then they’re liable to lose assets that they might be able to retain if they have a platform.”

He said that a life company may have sold a pension a number of years ago, and the financial adviser may want to move those assets. “If the life company doesn’t have the platform, it’s possible that the assets will move elsewhere. Advisers are more and more moving money onto platforms,” he added.

But it is not just adviser platforms that have grown. Direct-to-consumer platforms have grown in a dramatic way as well. There are now £73.2bn of assets administered on direct platforms, according to Platforum, as of the end of September last year.

This is a rise from £64.9bn under administration at the same point the previous year. Nearly a third of this market is taken up by Hargreaves Lansdown, with a 29 per cent share. But other IFA-owned brands are also doing well. Together, Hargreaves Lansdown, Bestinvest, Willis Owen and Chelsea Financial Services have cornered 37 per cent of the market.


As the platform sector permeates, so the FSA is keeping tabs on the industry. It has already ruled on bundled charges, with most in the sector accepting the process for unbundled charges, and many saying transparency is a good thing.

It has also banned cash rebates, preferring clients to be paid back in units instead.

The question it is now looking at is the role of model portfolios. This area, where advisers can put their clients into an off-the-peg portfolio, saving on time and extra work, has grown dramatically.