Tips on meeting the consumer duty when reviewing a platform

When it comes to investments for example, the Financial Conduct Authority's guidance says an adviser should consider (among other things) whether the overall cost to the customer, including all product and distribution charges in the distribution chain, provides fair value.

Indeed, platforms may levy charges such as wrapper fees, transaction fees, transfer and exit fees that can quickly add up, notes Mariam Pourshoushtari, an analyst at research consultancy Platforum.

“Clients who are frequent traders or are in drawdown may pay significantly more than another, even with the same portfolio size.

“Some platforms cap their fees for portfolios exceeding a certain size, but may reintroduce additional charges later on to reflect the added risk and costs. On the other hand, platforms may set fee minima, negatively impacting their suitability for the smallest portfolios.”

Ben Hammond, director of consulting at the Lang Cat, agrees that certain platforms will suit some more than others, depending on their needs.

“Those simply wanting to top up an Isa will be best suited to a straightforward service with no bells and whistles, while a customer with retirement needs, or who’s reached their annual Isa and pensions contribution limits, may need more complex investment solutions or drawdown options.”

Developing relationships with platform providers

Apart from considering fair value, regulatory guidance on the consumer duty states that “distributors must understand the products or services they distribute”.

Once the options have been narrowed down, Hammond suggests individual conversations with potential platforms, including questions to ensure it meets clients’ needs.

Darren Winfield, a wealth insight analyst at Defaqto, also suggests developing strong relationships with platform providers to understand their offerings in detail.

“This involves regular communication, attending platform-specific training, and staying updated on any changes in the platform’s fee structure or services.”

Our literature library is designed to allow advisers to self-serve as much as possible.Iain Petrie, Scottish Widows

Indeed, Pourshoushtari says that a significant, additional consideration is whether a platform will offer bespoke pricing deals.

“These can be anywhere from minor adjustments to rate cards to complete overhauls, and may be dependent on either the firm’s, adviser’s or individual client’s level of assets on the platform.”

A provider may or may not offer bespoke pricing. But, freelance compliance consultant Tony Catt says what providers are keen to do is demonstrate the functionality that they provide.

“Even if an adviser has used a platform for a long time, I would recommend that advisers ask for refresher demonstrations to enable the platform provider to show their latest innovations,” Catt adds.