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How best to use fund platforms

This article is part of
Guide to Picking a Platform Post-RDR

How an adviser switches their clients’ assets can vary depending on the platform and re-registration in particular has become a capstone issue in the market.

Shaun Sandiford, business development director of Axa Wealth, says: “For those platforms that offer free re-registration movement of assets from one platform to another can be relatively simple. However, other platforms charge for this service which can present issues in some instances.”

Generally a switch is just a sell trade followed by a buy trade. But the mechanics of the switch can differ too, as Mark Polson, principal of The Lang Cat consultancy, notes.

“Some platforms crash the trades together and ‘pre-fund’ the switch, which means you an do the buy trade before the sell trade has settled. This is popularly believed to be a good thing, as it minimises out-of-market time, but no-one is really sure.

“Anyway, platforms who do this, and some others besides, will give advisers the use of a big button marked ‘switch’ which parcels up the sell and buy into one instruction and then runs off and does it. Others make you do each bit separately.”

An adviser can show the platform is best for their client in a number of ways.

“The best thing is to identify the client’s needs first and write them down,” says Mr Polson. “Then look at the platform and see if it can meet those needs. There’s no point in putting a client who needs an offshore bond on a platform which doesn’t offer them.”

Mr Sandiford adds that advisers will also need to demonstrate the economies of scale of using a platform, and the access to the market which it affords them as an investor.

“This can be done through playing out different scenarios and comparing the outcomes from a cost and capability perspective.”

Remuneration comes down to the new adviser charging regulations, which will have to be agreed with each and every client.

“It may be something or nothing, but always paid for by the client,” says Mr Sandiford.

But new rules from the tax authorities now require investors to pay income tax on any cash or fund units they receive as rebates.

While investors historically have not declared their rebates as taxable income, HMRC has pronounced that any rebates handed to consumers from April 6 are annual payments and therefore count towards taxable income.

The rules also oblige adviser firms themselves to deduct the income tax owed to HMRC from these client rebates before they are paid to the client.