Avoid spin when choosing platform: Nucleus

The adviser-owned platform provider’s 16-page paper, Questions Advisers Should Ask Platforms Today, said advisers should undertake regular due diligence.

They should focus on their firm’s client bank, proposition and business objectives, in addition to the platform’s proposition, the current state of the market, and regulation.

It also claimed that what has previously passed as due diligence was often no more than research, and called for advisory firms “to get underneath the spin” when investigating the merits of a provider.

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The need to bolster due diligence processes has been reinforced by new FCA rules in its 2013 platform paper, which includes tougher business requirements such as the need to clearly disclose the total platform charge to the customer.

David Ferguson, chief executive of Nucleus, said: “This is a major change and one that shifts the burden of responsibility firmly onto adviser firms, which probably need to become more cynical and searching of their potential partners.

“Essentially, they need to stop believing the sales spin and cut to the substance. It’s hard work but it will pay huge dividends as the platform winners will obviously be those open enough to respect the process and progressive enough to know who’s calling the shots.”

The paper calls for advisers to follow a due diligence structure:

- Examine client proposition and consider if the platform can support it

- Consider how the platform evidences its regulatory obligations

- Determine the sustainability of the platform’s business model, service quality and relationship management

- Review the tools and functionality of the platform

- Review pricing, but only after completing the first four phases

Adviser view

Garry Hale, director of HK Wealth Managers in Stirlingshire, said: “This is helpful. Bite-sized guidance on how best to do this is useful to all adviser firms keen to be on the front foot.”