Retaining independence in the age of due diligence

This article is part of
Evolution of Platforms - March 2014

“Where a platform is deemed to be an appropriate solution, research can then be undertaken for individual clients. This is based on specific objectives and complexity of the client’s circumstances.”

It seems advisers who have this back up and support will not be facing as tough a challenge as those who are directly authorised.

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Mr McAndrew says: “I do believe it is harder for independent advisers to undertake this level of work and research, given the majority are unlikely to have the resource in-house.

“Many will have to resort to external policy making functions/support, which - in turn - will have an impact on their bottom line.”

Sheriar Bradbury, managing director of IFA Bradbury Hamilton, agrees: “This will often - although not always - be a simpler process for restricted firms.

“The complication comes where a firm is offering a whole-of-market service as the onus is on the firm to demonstrate that it has carried out sufficient research and due diligence against a sample that is representative of the whole market.”

‘One size fits all’

Independent advisers already have it harder than restricted peers with platform use, after the regulator’s first RDR implementation review warned IFAs may be hard pressed to prove their independence if they are ‘shoe-horning’ clients into one platform.

Although the regulator stopped short of banning IFAs from using just one platform for all their clients, this is an area the FCA will no doubt be keeping its eye on.

Last year, Matthew Walne, managing director of Leicestershire-based Santorini Financial Planning, said he “predominantly” uses a single platform to process client business and intends to continue doing so.

He said his independent status would also require him to look beyond these platforms - or platforms altogether - if he needs to access a product that he cannot find on his chosen provider, but that he can simplify his due diligence demands by having a single default provider for the majority of clients.

While no one is accusing an IFA of any wrong doing if they choose to use a ‘default’ platform, Mark Polson, founder of consultancy the Lang Cat, warns it may be difficult to demonstrate client suitability to the regulator.

“We think independent advisers would be hard pressed to demonstrate that one platform is suitable for every customer from a young accumulator starting out and doing a basic Isa/Sipp combo through to a very high net worth individual with complex decumulation demands.

“If they can demonstrate that suitability, then fine.”

Mr McAndrew does not believe ‘one size fits all’, adding that IFAs should have “no pre-determination” before under-taking research for a client.