You’d be forgiven for thinking that the ongoing debate raging about the merits of different platforms’ business models points to a market ill at ease with itself.
A lot of energy is devoted to discussing who has the ‘right’ model, based on an assumption that there is one. Nowhere is this sort of monochrome thinking more evident than in the debate over discounted – or ‘super clean’ – share classes.
While price competition at platform level is seen by some commentators as the ‘right’ sort of price competition, the same people proclaim price competition in funds is the ‘wrong’ sort. Given that the client benefits from lower charges in either scenario, it’s difficult to see the distinction.
Now out in the open, all platforms know the fund pricing available and have the opportunity to make the case why they should receive the best terms.
Competition drives innovation. Like natural ecosystems, diversity is the sign of a healthy market. We now have a range of platform fee models and fund share classes available. Confusing for the customer? Not if there is a clear total cost of ownership.
Life would be simpler if everything was homogenised, but who is asking advisers what they want for their clients? Adviser businesses are not homogenous and the freedom to choose means advisers can shape their propositions in a manner they believe delivers the best client outcome. Standard Life offers discounted clean funds, but advisers decide whether they want to use these funds, or the Standard Life platform for that matter.
It is sometimes easier to consider the value of things by considering the alternative. Setting a single fund price across the industry will inevitably lead to a levelling-up of fund pricing for large numbers of investors who previously benefited from enhanced rebates.
Surely no one is arguing that this is objectively the ‘right’ outcome?
Selecting on price is one of the factors to consider and this is supported by the regulations. I do not see anyone lobbying for centralised price setting and regulation. Moreover, I have yet to find an adviser who is so seduced by any discount that all other issues of suitability fly out of the window.
The reality is that advisers are far smarter than some commentators give them credit for. They (in other words the market) will decide whether or not a discount, or indeed any other aspect of a platform’s proposition, delivers value. To ignore this contribution is to grossly undervalue the quality of advice provided.
And thankfully for all of us, advisers don’t see price as the only basis for competition in the market.
Platforms vary hugely in terms of functionality, adviser support, range of investment options, range of tax wrappers; as well as through platform and fund pricing. The rich biodiversity and competition this creates is something to celebrate rather than decry.
Like Darwin’s Galapagos finches, we all must adapt and innovate to survive and thrive. On the other hand, we could all just comply with the ‘right’ model (who decides this?) for advisers and clients. However, I, for one, would rather live in the Galapagos.
David Tiller is head of adviser platforms at Standard Life
