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Platforms urged to catch up with adviser fee models

Platforms urged to catch up with adviser fee models

Platforms are struggling to keep pace when it comes to shifting adviser fee models, according to the Lang Cat.

New data from the consultancy showed advisers were shaking up traditional fee structures but many platforms did not have the functionality or features in place to support these changes.

The Lang Cat polled its panel of more than 800 advisers and found most used a mixture of three initial fee structures — work type, percentage-based and time-based — rather than one method in isolation.

Many advisers were also applying a ‘collar and cap’ approach to ensure fees strike a balance between being profitable and too high, according to the Lang Cat.

In terms of ongoing fees, straightforward percentage-based still ruled the roost and was favoured by 70 per cent of advisers.

Data from the Lang Cat’s Platform Analyser, an interactive tool launched last month, showed although platforms were well set up to cater for fixed and percentage-based charging, few platforms offered more than just these two basic charging structures.

Only Ascentric, Multrees, Raymond James and Seven IM supported all four ongoing advice fee structures, including ‘collar and cap’ and tiered ongoing fees.

Terry Huddart, head of proposition at the Lang Cat, said: “This is just the beginning of the fee model evolution, with the Prod rules prompting advisers to rejig ongoing charging structures to suit client segmentation. 

“So, platforms really need to keep their eye on the ball and look at adding either new functions or improving existing ones. We recommend a number of actions, the most important being the need for more platforms to follow suit with those that already offer functionality to cater for tiered advice fees in particular.”

The Lang Cat stated this data was timely as excessive fees for products or services were highlighted by the Financial Conduct Authority as one of the four key areas for potential harm in its latest round of ‘Dear CEO’ letters, with firms warned to have robust systems in place. 

Product governance rules also echoed this where firms are required to consider the total cost that clients are expected to pay.

But Martin Bamford, head of client education at Informed Choice, said platforms were "excellent" at facilitating payment requests from advisers.

He said: "Regardless of the adviser fee structure, platforms are able to pay adviser charges expressed as monetary amounts or a percentage of assets under advice, or a combination of the two in some cases.

"The profession loves to complicate fees and engages in too much navel-gazing on this subject. Simple fee structures are easiest to explain to clients, who rarely care much about this, assuming they feel they are getting good value for money."

imogen.tew@ft.com

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