Costs play their part in platform selection

This article is part of
Guide to platforms

Costs play their part in platform selection

For the bargain-hunting Brit, negotiating costs and saving money on products or service is par for the course, but in some cases a price tag should not be the deciding factor.

When it comes to advisers and their platform providers there is no doubt that the costs involved play a part in the decision about whether to use one over another, but for most advisory firms, there are many other elements at play.

Steven Nelson, consultant director at The Lang Cat, highlights: “In all the work we’ve done analysing platform charges, new business results and the work we do with advisers, we’re yet to see a direct link between cost and new business success.

“Or in other words, cost is not the key determinant of new business flows. That’s not to say it’s not important though and cost is always a factor when we work with advisers on platform research.

“Ultimately, adviser firms need to find a platform that best enables their client proposition whilst being at peace with it offering value for money in the grand scheme of things.

“Something cheap and unsuitable is still unsuitable and we don’t think people should lose any sleep over a few extra basis points if it helps enable a better set of processes and day-to-day life for the adviser firm. Clients will ultimately benefit from this in the round.”

There are also cases where cost lays no part at all. Verona Kenny, head of intermediary at 7IM, explains: “Every platform is different and, therefore, the features, and more importantly, the service that is required to managed multiple clients on a platform, may not be available with the cheapest providers.

“As technology evolves, the cheapest platforms may also not have the resources to embed the latest innovations that can give rise to greater efficiencies, meaning that clients do not benefit from the best functionality and experience available at the time.”

Ms Kenny argues that functionality will always come first for advisers when choosing their platform provider.

“If you cannot provide the service and functionality that clients expect then the cost is irrelevant,” she says.

“Once the required functionality has been chosen, deciding which platform can support it at the best cost will be the next consideration. This is where reputation and user references become particularly important.”

Although not a cost borne at the outset, the FCA’s recent Investment Platforms Market Study outlined concerns over the difficulties faced when switching from one platform to another – particularly the exit fees incurred.

Christopher Woolard, executive director of strategy and competition at the FCA, explains: “The FCA found that while competition is generally working well, some consumers and financial advisers can find it difficult to shop around and switch to a platform that better meets their needs.”