The technology behind the platform

It is difficult for advisers to get under the bonnet of the technology but the regulator is showing a growing interest in the underlying technology that powers platforms, says Chris Smeaton, director of marketing at James Hay.

He says this interest from the City watchdog is “rightly so as a question mark hangs over whether aging technology can continue to deliver a good client outcome with inflows increasing at the rate they are”.

Mr Smeaton says it has been widely reported that a number of platforms are migrating to new technology but there have been numerous articles on just how much of a challenge and how costly implementing a new IT infrastructure can be. Then there is the potential disruption to clients.

Paul Boston, sales director of Novia, suggests advisers should look at the following when it comes to the ‘owner’ of the technology:

1) Do they have a system?

2) Is it proven to work?

3) How long have they been in the market?

4) Are they financially stable?

5) Have they taken on too many new clients, are they over-committed?

6) Is the business profitable?

Providers using tried and tested technology should provide advisers with a level of comfort and they can identify the core functionality works well, including trading and availability of online services, Zurich’s Mr Wilson says.

He says there is an element of trust behind the technology used, bearing in mind there are only five or so main players in the UK market.

Mr Wilson says: “Advisers need to ask themselves if they absolutely believe the platform provider has carried out their own due diligence and that they would be able to support clients through their business should something catastrophic occur.

“Advisers should be cautious when providers are using untested or new technology and be aware of the impact this can have on their clients and their financial planning as well as their own business. This should form a core consideration of any due diligence process.

“Supporting advisers in how to get the maximum out of a platform is paramount. Without this support, advisers run the risk of not achieving the best outcomes for their clients; failing to maximise their efficiency which could ultimately drive up costs of the adviser’s services.

“For instance, a need for ongoing support given adviser members of staff will leave and new people join over time.”

Ultimately advisers should expect to find that most platforms in-source their core technology from a third party these days, Barry Neilson, business development director at Nucleus, says.

In-sourcing has a number of benefits, he adds, as essentially there is a third party investing, on an on-going and regular basis, in the platform’s technology.

Mr Neilson says: “It is important to understand the development road map for that technology and their financial capability to deliver that road map.

“Advisers may also want to get comfort from the relationship between the platform and the technology provider, such as duration of the contract, the structure of any termination clauses, the responsibility to deliver any regulatory driven changes and the level of commitment to developing spend.

“There are perhaps eight major players in the platform market either considering a wholesale technology upgrade or needing significant system clean-ups to be prepared for the next generation.

“Asking detailed questions is critical when doing due diligence here. A platform should be able to state what its current core technology system is, describe any current plans to change (or change in progress) and when the changes are due to be implemented.”