Simple why ‘high-cost’ platforms still attract business

Colin Turton

Price features increasingly strongly in the platform selection decision-making of most advisers, and quite rightly so.

So how do platforms with a starting price of around 50 to 60 basis points (bps) ever win business when they are competing with platforms that have lower fixed charges or headline rates in the order of 20 to 25 bps? The answer is quite simple.

Fund charges are nearly always the largest element of the platform solution cost, often dwarfing platform charges. There is now a wide range of fund configurations that can give rise to significant variations in costs.

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So a significant element of the solution cost is down to the fund deals being secured by platforms.

Of course, the headline platform charge still has some influence on the total cost of ownership, but special platform pricing deals are increasingly being struck with adviser firms.

Advisers also consider factors other than price when selecting platforms, such as features, functionality, service quality, and the likely longevity of the platform.

Mix all of this with the fact that the real total cost of ownership often bears little relationship to the publicly quoted headline platform charge rate, and it is clear why there might appear to be ‘high-cost’ platforms winning.

Colin Turton is a director of AdviserAsset, a platform research and due-diligence tool provider