Platforms support ‘bundled’ adviser charge model

Several major UK platforms have said they would support advisers who want to ‘bundle’ platform costs with the adviser charge, following the FCA’s move to allow such plans in last month’s policy statement on payments to platforms.

Cofunds, Novia and Ascentric have all said they would be open to negotiating bespoke pricing with advisers that would allow firms to pay a flat fee to a platform and treat it as a cost of business, meaning it is paid for from the adviser charge.

That would mean clients pay one rate for advice services with the platform charge included.

Novia and Ascentric already operate such models for a small number of advisers, with Ascentric managing director Hugo Thorman saying it could give advisers the ability to guarantee costs to clients.

Skandia and Aviva both said they had “no immediate plans” to develop pricing in this area but expressed support for the concept.

Trade bodies last month described the FCA’s stance as a “shift in the balance of power” in favour of financial advisers, adding that it could help reduce overall costs for some clients.

But platforms have warned advisers that they must be aware of all regulatory implications of this business model, which may include obtaining additional permissions from the FCA.

Verona Smith, director of marketing at Cofunds, said: “We expect more conversations about this in the coming months but advisers need to go into this with their eyes open and understand what it would do to their business models.

“Advisers may need CF10 or CF3 permissions from the FCA, and they will take on extra regulatory requirements. At the moment the platform carries the can but, if that changes, the adviser’s proposition changes.”

Ross Easton, head of wrap platforms at Standard Life, said the wide range of services his firm provided – including operating tax wrappers, negotiating fund prices and holding client money – meant his firm was unlikely to agree to be paid directly by advisers.

“The alternative to the client paying the platform charge directly would be that the adviser builds their own platform,” Mr Easton said.

“This could mean taking on the responsibility for aspects such as holding client money. It is feasible for advisers to do this but there are many risks, costs and challenges to their businesses.”

‘Bundling’ of adviser and platform costs is the future

Nucleus chief executive David Ferguson said last week the concept of bundling advice and platform charges is potentially the “end game” of the current upheaval in the platform market, even though the idea is in its infancy.

Nucleus does not have any adviser clients using the platform in this way, but Mr Ferguson said: “I can see this being the end game, but it is a long way off, perhaps 10 years.”