Lack of innovation from platforms is failing clients

Lack of innovation from platforms is failing clients

A lack of flexibility and innovation from platforms is restricting drawdown clients' ability to receive income, according to research from the Lang Cat.

The consultancy examined the offering of 16 UK platforms and found that a majority of platforms refuse to allow clients to receive income on alternative days of the month and do not offer "pre-funding" of income.

The eight platforms that allow clients to withdraw income on a monthly date of their choosing are Zurich, Aegon, Ascentric, Aviva, Elevate, Nucleus, Seven IM, and Standard Life Wrap.

This compared with six out of the 14 platforms allowed advisers more flexibility around the day they wished to receive income in 2017.

One barrier to platforms allowing withdrawals on any business day is the lack of providers who offer pre-funding on income payments.

This is the practice of platforms paying from their own resources the end client and then a short time later the platform collects the cash from the product provider.

The research found only three of the 16 firms examined as part of the research provide full pre-funding. Those firms are Zurich, Elevate, and the Standard Life Wrap.

Steve Nelson, consulting director at the Lang Cat, said "it’s no coincidence" that the platforms which offer this service are among the largest in the market, as providing full pre-funding is expensive.

He added: "Consumers will get their money back slower from platforms that don’t offer pre-funding on lump sum withdrawals, which could mean a wait of more than a week compared to those that do.

"Pre-funding also creates certainty and removes the admin drag for advisers of having to constantly check if all the money has arrived to send on to clients."

The previous time this research was co ducted, four of the 14 platforms examined offered this service.

The final area identified by the Lang Cat as an issue is the inability of platforms to offer consolidated income payments, that is, for a client to receive one income payment combining the income earned across both a Sipp and an Isa - only four out of eighteen platforms allow this.

Those four are Zurich, Elevate, Embark, and Standard Life Wrap.

Clients of other platforms receive the income on different days of the month for each product.

This is one area where, according to the Lang Cat’s research, the number of platforms offering a service has increased, as only two platforms offered consolidated income payments when the research was last conducted.

Alastair Wilson, head of retail platform strategy at Zurich, who commissioned the research, said: "Some people believe that platforms are homogenous with little to separate them.  

"But if you get into the nitty gritty of how to run client propositions via platforms, then the devil is in the detail.  

"In the new retirement landscape, we shouldn’t underestimate the importance of cash management.

"Platforms are income-generating machines and giving people their own money in an efficient and manageable way should be a priority."