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Direct to consumer platforms as competition

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Guide to platform due diligence

The steady growth of direct to consumer (D2C) platforms is bridging, in part, the ‘savings gap’ - or the ‘advice gap’ - for investors, says Barry Neilson, business development director at Nucleus.

He says Nucleus is exploring how it participates in that market and as a platform owned by advisers would look to get into this market in partnership with advisers so that there is no conflict over client ownership.

Mr Neilson says: “The growth of D2C platforms is partly driven by the availability of new technologies providing access to ever wider information. Advised platforms still dominate UK assets although this may change over time.

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“Advisers may be suspicious of partnering with platforms that operate aggressively in the D2C market, as this could challenge ownership of their clients.

“Attention should also be given to how their development spend is allocated between the platforms as this may create conflict between the advised and consumer focused platforms.”

But other platforms FTAdviser spoke to questioned whether a direct-to-consumer offering could ever sit alongside an advised one without problems arising.

Alistair Wilson, head of retail platform strategy at Zurich, says platforms targeting the D2C and adviser spaces will be challenged in ensuring one doesn’t impact the other. He says it will be interesting to see if there is consistency of pricing, fund ranges and available support.

Mr Wilson says: “The direct market appears to have a wider variance of charging structures (whilst there is commonality around the likes of trading costs for stocks and shares, when compared to adviser platforms).

“Adviser platforms have, in the main, reduced the amount of add-on fees clients are charged, and this isn’t yet reflected in the direct to consumer world.

“There are examples of direct to consumer platforms charging for switches, withdrawals, dividend reinvestments, annual fee payments, minimum fee levels, capped fees, set up charges, additional statements.

“These additional types of charges make it harder for clients to follow what the likely cost of holding and administering assets on a direct to consumer platform is, and can cause problems with illustration comparisons from ‘simpler’ charged propositions.”

Stephen Wynne-Jones, head of marketing at Cofunds, says he has no plans to offer a Cofunds-branded direct to consumer service and strongly believes investors are best served via full advice, or via a lighter-touch administration or guidance service if advice isn’t needed at that time.

Mr Wynne-Jones says: “We work closely with our clients to enable them to offer the range of services they need for their particular client segments.”

Codunds is one of a number of platforms that either does already is planning to offer a ‘B2B2C’ offer, which effectively offers advisers to white label a version of the platform to offer a de facto direct service to lower value consumers.