Platform types and whether you need one

“It’s there to help clients – or their advisers – buy investments, hold them for a while, maybe in a tax-efficient way if they want, analyse them if they’re interested and then sell them when they’ve had enough.”

Platforms link funds, tax wrappers, investment choices and adviser charging - and the term ‘platform’ can cover different types of service.

“The market is divided in to broad and narrow platforms, which used to be called supermarkets and wrap platforms,” explains Shaun Sandiford, business development director of Axa Wealth.

“These differ in terms of the number of funds offered and the functionality available. There are many different options within broad and narrow, so it’s really down to the adviser to thoroughly research which best meets the needs of their business and their clients.”

While fund supermarkets offer broad ranges of Oeics and unit trusts, wraps tend to also offer wider access to other products and are useful for advisers who want to agree their own remuneration with their clients.

Terry Huddart, technical communications manager at Nucleus, points out that there are about 30 or so platforms currently operating in the market, with each offering a different levels of adviser control and transparency.

He divides the common models into five categories:

• Wrap platforms: where the client is clearly the end investor who pays for the administration service being provided, meaning wrap platforms are agnostic on asset availability. Wrap platforms generally support a wider range of integrated tax wrappers.

• Fund supermarkets: companies that do not offer whole of market investment and whose pricing models had involved retaining fund rebates. These models still exist on legacy books but, driven by the retail distribution review, fund supermarkets have adopted wrap pricing models for new business.

• Investment platforms: exist primarily as a route to market for an operator’s own investment management proposition. Whether the operator offers mutual funds, a DFM proposition or perhaps both, and regardless of whether or not the platform offers open architecture investment choice.

• Platforms to rent: companies who provide the technology and infrastructure to support a platform.

• Direct to client: companies who provide clients with direct access to a platform.

For IFA’s that will be using an adviser charging model, Mr Polson says a platform is essential as the company that administer funds for most of the big investment companies have stated that they will not facilitate adviser charging.

This doesn’t mean advisers can’t get by without platforms, though.

“Adviser charging may be an issue with some providers, whether fund companies or insurers on some product classes, but as they would point out, adviser charging is entirely optional: clients are free to pay by cheque.”