PlatformOct 25 2017

Advisers admit cost savings fuelling platform market

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Advisers admit cost savings fuelling platform market

The vast majority of advisers have found platform technology makes the process of providing advice more cost effective, as the regulator probes whether these cost savings are being passed onto advisers' clients.

More than four in five – or 86 per cent – of advisers made this assertion, while two thirds – or 66 per cent – of advisers quizzed in the Aegon research, published today (25 October), said the main reason platforms are beneficial to clients is the greater convenience they offer clients.

The findings are likely to be of interest to the Financial Conduct Authority.

In July it said that as part of its Platform Market Study it would look at whether advisers have a “positive impact on the cost and quality” of a platform, and if and how this was passed on to clients. 

The FCA said it wanted to better understand if the benefits advisers gain from platforms are passed on to clients, and if platform use affects the adviser charging model.

Research by Aegon also suggested this was likely to become an increasing area of concern for the regulator as the market looks set to grow further, with more than a third of advisers expecting to direct more business to platforms over the next year.

This rises to nearly half among adviser firms with six employees or more and only 2 per cent of advisers said they would direct less business to platforms in the next year.

Research by Fundscape has found that assets under administration in the platform sector increased by 6 per cent in the first quarter of 2017 to £520bn. By 2021 assets are expected to exceed £1.2trn.

Steven Cameron, pensions director at Aegon, which in August 2016 bought platform giant Cofunds to become the biggest player in the advised platform market, said the new wave of technology in the financial services sector was having a "transformative effect, offering opportunities for innovative products and services.

“Platforms in particular are changing the industry, and it’s clear that advisers are positive about the possibilities."

Mr Cameron also said: “The significant growth of defined contribution schemes and the popularity of the pension freedoms, with many more people remaining invested during retirement, mean the importance of advisers supporting investment decisions continues to grow."

Platform providers have a central role to play in working with the intermediary community to ensure that platforms continue to offer the best possible tools to support advisers and their clients, he added.

After cost savings, the main reason advisers gave for using a platform is because they give access to better investment choice, with 63 per cent of advisers giving this as their motive for using platforms.

Meanwhile 58 per cent said they help manage a range of products and investment in one place and 38 per cent gave cost as a reason.

The Financial Conduct Authority's market study into platforms is due to be published in summer 2018.

The research was conducted among 252 advisers in June.

damian.fantato@ft.com