PlatformsNov 26 2015

Platforms reveal plans for your orphan clients

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Platforms reveal plans for your orphan clients

Platforms Cofunds and Old Mutual Wealth have predicted an increase in ‘orphan’ clients in the run up to the sunset clause.

The legacy business rules will be implemented in April 2016, meaning all new and existing business will be on a platform charge basis, with only unit rebates to facilitate discounts being permitted.

For the older platforms like Fidelity’s FundsNetwork, Old Mutual Wealth and Cofunds, if advisers do not want to retain clients by moving them onto adviser charging, or are unable to, these clients will effectively become orphaned.

Cofunds’ head of marketing operations Stephen Wynne-Jones told FTAdviser that there will be a small increase in the number of investors that find themselves without the services of an adviser, or indeed feel they do not require those services.

At present, out of 800,000 end-investors that use Cofunds to manager their investments, less than 0.1 per cent are orphaned.

Mr Wynne-Jones added: “We strongly believe in financial advice - our proposition is geared to this and we do not offer a direct service.

“If an investor did find themselves without an intermediary on Cofunds, we would let them have access to their investments online, but we very clearly state that because we are an intermediate platform this should only be considered a temporary arrangement until they secure another adviser, or re-register their investments to a suitable direct platform.”

A spokesperson for OM Wealth admitted that the platform had a small number of clients who have told them they no longer use an adviser. “We anticipate a slight rise as the sunset clause deadline approaches; over 80 per cent of platform assets have already moved to an unbundled charging structure.

The firm explained that during that process it directs clients to a ‘find an adviser’ online service, with some non-advised clients finding a new adviser in their area. “We will always be advocates of advice, encouraging clients to find an adviser in their area through our own tool or others, such as Unbiased or Vouched For.

The spokesperson added that OM Wealth recognise that if clients are no longer advised, they are now responsible for the suitability of their investments. “We have also developed our online customer centre to offer wider services to non-advised customers, for example allowing them to top-up their investments.”

A spokesperson for FundsNetwork said they have been supporting IFAs with the move to adviser charging for over three years and the overall conversion rate to adviser fees has been encouraging.

“There will inevitably be a segment of customers which some advisers may no longer wish to service or where a customer no longer wishes to pay for advice.

“Although FundsNetwork was designed to support advisers and their clients, we will support an end customer if the adviser no longer wishes to service them or if the customer no longer wishes to continue the relationship with their adviser.

“However, it is important to note that FundsNetwork does not provide guidance or advice.”

Tim Orton, chief executive officer of the Aviva platform, said in the third quarter of 2014 the number of orphaned clients was 664 and in the third quarter of 2015 that figure rose to 1040, which is 1 per cent of the customers on the platform.

He added that as the number of orphaned clients is not expected to grow, the administration burden would be minimal.

Barry Neilson, business development director at Nucleus, commented that an environment is being created where platforms will need to have greater oversight of how propositions are being used and take action where they suspect bad client outcomes.

“Platforms will need to have more oversight and interaction with clients which runs contrary to how platforms have been set up, which is for intermediated business.

“Clients may have been introduced by an adviser originally but that relationship has terminated and platforms are left dealing with clients.”

He added that the issue for these platforms is that the sunset clause may be a sizeable catalyst for the number of orphan clients they have to deal with.

Earlier this year, FTAdviser warned that some platforms may be risking adviser relationships by directly contacting clients with which IFAs have less contact.