Platform View: Strive to find the right fit

There has been more platform-pricing news this year with Alliance Trust increasing its fees, Transact reducing investor costs and Hargreaves Lansdown announcing theirs.

It is hard to work out the true impact of the Bristol-based fund broker’s costs given the plethora of charges involved, although City analysts seem to think the impact is limited, according to estimates of the hit on Hargreaves’ profits.

Industry commentators are in a frenzy with all this activity on pricing as it gives them something to write about, but interestingly the actual users of platform services – advisers – consistently comment in the blogs that “what really matters is not a handful of basis points, but service quality”.

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This sentiment about service quality is highly pertinent but I also think if advisers are considering adopting a platform, then they really should think carefully and early on about their businesses and investment processes. In other words, don’t think of what the platform can do in isolation.

Take, for example, one of our adviser firms that employs seven business producers and two administrators (one full-time, the other part-time) and some of the comments he made in an article he wrote for us:

“...many advisers that have adopted the use of platforms have integrated them into their existing models rather than taking the opportunity to start with a blank piece of paper and design a business model that has the platform(s) at the heart of it…” and;

“There are a range of platforms to choose from but which one(s) are right for your business will depend on the client model that you are running…” and finally;

“It seems that instead of focusing on which platform is the right one to suit the business model(s) that the firm is going to follow, most debate is given over simply to cost.”

There are a lot more comments in this vein, but the message is very clear.

The firm in question is a business that has benefited enormously from the efficiencies that have been achieved by picking a platform that would complement the business rather than picking a platform and making his business fit to what the platform can offer.

The business owners thought clearly what the goal for the firm was at the outset and then selected a platform that had the desired functionality.

If the combined effect of the integration of a platform with adviser processes is not thought through, then the result could be unnecessary costs and wasted effort.

The other point worth noting is that the adviser clearly recognised in making his decision that platforms are all different to a greater or lesser extent, which I must say others seem to struggle to recognise with their obsession on cost.

Bill Vasilieff is chief executive at Novia Financial