Platforms told they must 'evolve or die'

Platforms told they must 'evolve or die'

Platforms that fail to adapt to the changing nature of advisers' businesses will not survive long-term, according to Barry Neilson, chief customer officer at Nucleus.

Mr Neilson said much has changed in the market since platforms were first set up. Whereas their initial purpose was to administer investments they now need to cater to the needs of increasingly specialist advisers.

Mr Neilson said: "Platforms were really set up just to be investment administration platforms, but the winners and losers in the platform market in the years ahead will be those firms that adapt to the way advice businesses are changing.

"All advice businesses used to do basically the same things, but a combination of the pension freedoms, and people living longer, and the increased administrative burden, means advice firms are becoming more specialised.

"I think this will continue, and platforms will have to change what they offer to match that."

For instance he said the increased use of technology by consumers has not yet been reflected by many platforms.

Mr Neilson provided the example of an advice firm he knows in Aberdeen, where most of the clients are oil industry contractors.

He said: "Those clients have tax needs as well, so the advice firm has hired some accountants, but the platform cannot connect with the accountancy software."

Mr Neilson described platforms' lack of ability to integrate with other tools used by advisers as "the biggest issue", as "data connectivity is something clients expect in other areas of life, and they expect it from their adviser".

He added: "When platforms were built a decade ago, they were built for a homogenised service, that is why we have seen so many replatformings, they are having to build something new."

Latest research from the Lang Cat out in May also found platforms were failing clients, particularly on drawdown.

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

Many platforms also were not able 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.

Mr Neilson warned things needed to change in the platform market as more advisers use DFMs, they want really good performance data they can access, and the ability to calculate capital gains tax liability is increasingly important for advisers.

"Historically, when a client reached a certain age, they just bought an annuity and the relationship with the adviser ended, it’s different now, and platforms need to reflect that," he said.