Catering for each client individually

Undertaking platform due diligence for an independent financial adviser firm is an interesting proposition as there is no single source of information to carry out this due diligence.

Most advisers that use platforms usually only want to use one platform for the sake of administrative ease.

However, the Financial Conduct Authority (FCA) has stated its unease at the use of a single platform. It feels that no single platform can be the most effective for a wide range of clients with differing amounts of wealth, terms of investment and levels of activity.

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This all comes back to the FCA’s desire to see advisers undertake client segmentation to acknowledge the needs of the various types of client and the different service levels that would apply to them, in order to ensure they get a service that meets their needs.

Treating clients fairly does not mean treating all customers the same. The ‘one-size-fits-all’ strategy is surprisingly unlikely to suit many clients.

Many advisers want to be able to offer a centralised proposition, which is the most efficient way of offering investment services to clients.

The ability to present a range of tax wrappers with a variety of funds available within the same place is very attractive, and research should be undertaken to identify platforms that can provide this service.

The FCA wants clients to achieve good outcomes when undertaking financial planning. This means customers need to be considered on an individual basis in order to maximise the likelihood of a positive outcome.

The regulator has expressed doubts about whether ‘block transfers’ from one provider to another can realistically serve the needs of all the clients included in a block transfer.

be best advice for all the clients that are included in a block transfer.

But the competition in the platform market is fierce. There are established platforms and there are new platforms being introduced by insurance companies.

These various offerings have different emphases, whether it is the number of funds and managers, availability of tax wrappers, online functionality for advisers and/or clients, tiered charging structures or back-office efficiency and services. It is these different options that are making the choice between platforms quite complex.

In recent years, there seems to have been a race to the bottom regarding platform charges.

The problem here is that very few platforms are profitable and minimising the charges makes profitability more difficult to achieve.

Functionality for advisers and clients can vary quite considerably. Advisers and their administration want simple systems from which information can be obtained quickly.

The difficulty is that the platforms all use different systems that require a considerable amount of time to master before they become truly useful to clients.

Many advisers carry out their research in what would be considered a static manner – obtaining all the information in a snapshot and relying on this until they carry out their review, probably three, six or 12 months later. The sources of various reports that enable this include Rayner Spencer Mills Research and The Platforum.