Your IndustryApr 11 2013

The importance of the platform’s ownership

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Mark Polson, principal of platform consultancy The Lang Cat, says there are two main issues to bear in mind when considering a platform’s ownership.

“First, is the owner of the platform in this for the long term? Scale of spend to date is no indicator of ongoing commitment, and they’re often confused, normally at the urging of platforms who’ve spent a lot on development.

“Second, how much do you hate life companies? If it’s a lot, then you best to steer clear of lifeco-owned platforms. If it’s not so much, then you can choose from a wider set.”

Scrutinising the platform owner’s financials is vital.

Terry Huddart, technical communications manager at Nucleus, which is part-owned by advisers who invest through equity capital arrangements and institutional investor Sanlam, suggests the following considerations:

• Ask the platform for details on their accounts, including profit/loss over the past five years of specifically the platform business.

• Assess how forthcoming the information is: is the information clearly and easily made available to you? If not, ask yourself why.

• Capital adequacy: ask questions about capital adequacy of the platform, regulatory capital structure and surpluses, client money arrangements and how CASS (client money sourcebook) applies to the wrappers.

• Are losses going in the right direction? Losses in the earlier years of a business are not uncommon, but are they in line with plans and expectations?

• Ask to speak to the finance director: is the platform happy to let you speak to their finance director? If not, ask why.

• How convinced are you on commitment to advisers: what assurances, or instincts, do you have that the platform is committed to working for advisers? What do their T&Cs say about contacting your clients directly?

• Corroborate the information: if the platform will supply you with the information it makes your life easier, however even if they do it’s worth corroborating freely available information with accounts from Companies House.

It is also important to have a substitute platform. “As part of your risk management process it would be useful to have a substitute platform or platforms lined up that also finished high up in your selection process,” adds Mr Huddart. “If a closure does happen this can make a transition quicker.”

It can also be important to consider cultural alignment and future direction. “Does the platform provider offer advisers the genuine opportunity to influence the direction of the platform? If so, does the answer outline specific channels?”