Platform migration is a common hurdle over which advisers must leap, but it is not an easy one by any means.
Platform switching, when it is in the client’s best interest, should be a simple thing to do. However, it can be problematic, for several reasons.
According to Clive Waller, managing director of CWC Research, “The answer, quite simply, is cost.
“The cost of moving a client from one platform to another is typically £500 to £1,200. Some big, highly process-driven forms can do it cheaper.”
This figure has not been plucked out of thin air. Mr Waller says: “Our best data comes from accountancy-linked firms who cost all the bits of the process.”
Eric Welsby, head of partner management, EMEA, for Bravura Solutions, explains why the costs can be high: "When moving an existing client, unless you are changing the basis on which you are providing the advice - such as advisory to discretionary - the adviser will most likely want to re-register.
The question of moving will come down to a belief a particular platform can provide great service at a competitive price. Mark Till"This can be fraught with issues, such as re-registration out fees (which are commonly £50 per line of stock). For a portfolio of 15 to 20 assets, this can be costly.
"Equally, due to inconsistencies with supported share classes, it can necessitate the client being 'out of the market' - ie forced to hold higher-than-normal allocations to cash for the duration of the transfer period."
According to Mr Waller: “In the majority of cases, advisers just avoid doing it. The exception is where the adviser owns the platform in a vertically-integrated solution.”
Mark Polson, founder of consultancy the Lang Cat, agrees: “For back books, it is rare to move, except where there is an overwhelming client benefit or – disturbingly – an overwhelming financial benefit to the adviser firm.”
He adds: “For back books, the key issue is simply hassle and cost. Usually the benefit to the client is marginal in pricing terms – a few basis points, often – and this would be more than outweighed by the administration fee an adviser would have to charge to do the individual suitability work, let alone the hassle of dealing with the providers.”
Regulation
When it comes to barriers to allow re-registration, Mr Waller says only “legislation or very strong regulation” will drive speedy, easy re-registration, because a lot of communication will not be straightforward.
He adds: “Asset managers and platforms just will not agree. This is a huge disincentive to platform mergers.”
This may need to be ironed out with Mifid II around the corner, says Mr Polson: “Moving venue for new business isn’t hard, though as part of Mifid II, it looks like advisers may have to justify continuing usage and suitability for existing arrangements.
“It will be interesting to see how that pans out – will it be feasible to say ‘this platform is okay for existing clients, but not for new ones’?”
Data and technology
For Kevin Russell, proposition director for SEI Wealth Platform, “chief among the hurdles” of re-registration is the issue of data.
“If advisers do not have tidy and up-to-date client records within their back-office systems, they will have issues when it comes to re-registration.”
According to Bravura Solutions’ Mr Welsby: "Initial access to the raw data to enable the analysis required for the suitability letter - often usually relevant for legacy pension arrangements - can be difficult.
"Moreover, there could be a loss of historical data. Due to limitations with most IFA's back office systems, moving between platforms can result in the loss of historical transactional data, including money flows.
"This means that after a platform-to-platform transfer, giving the client a joined-up story regarding factors such as historic performance and volatility will necessitate significant work for the adviser, which will likely be manual.
"Only adviser firms with advanced in-house technology capabilities can cope with this."
Mr Russell agrees: “There are issues with migrating the data from one platform to another, as every platform has their own design for data fields and valuation.
“This has partially been addressed through industry standards work, but not all platform providers comply, and where they do, there are still inconsistencies.”
Mr Waller says one way for firms to reduce costs and the burden of administration, is using practice management software, such as Intelliflo, which can help with aggregation.
Emma Napier, head of distribution for True Potential, says the firm uses Origo, which she says “makes the transfer of platform assets very efficient”.
She says carrying out “bulk shifting” of clients rather than adopting a new platform is one way to overcome the barrier. “Most advisers use alternative or new platforms at the new business stage. It is rare that advisers will move clients in bulk.
“That said, moving platforms should be based on the adviser’s business proposition and working from there, not the other way around.
“If a firm wants to work in a certain way, for example using technology to deliver advice cost-effectively, they should build their proposition around that.”
Timing
Mr Welsby adds: "Timing is a big issue. Self-invested personal pension (Sipp) transfers can still take months."
Lee Robertson, chief executive of Investment Quorum, agrees: “Platform re-registration is difficult, time-consuming, and messy.
“A common standard and timescale for doing re-registrations would be a real help for advisers from the platform community.”
Service and proposition
Reasons to move include suitability for the client, a compelling proposition and better pricing, says Mark Till, chief distribution and marketing officer for Aegon.
He comments: “For an adviser, the decision to move platform will not be taken lightly, given the time and effort involved in moving, and how embedded a platform is within a firm’s processes.
Asset managers and platforms just will not agree. This is a huge disincentive to platform mergers. Clive Waller“It is important to remember, however, that advisers always have a choice where they place their business.
“Ultimately, the question of moving will come down to a belief a particular platform can provide great service at a competitive price, and offer a compelling proposition with unique features.”
Yet for Ms Napier, “comparisons” on propositions are often irrelevant as a factor in switching, especially if the basis for each proposition does not match.
Therefore she explains it is better to focus on how platforms enhance advisers’ business and client outcomes: the service is a key feature.
Mr Russell agrees service is crucial, but believes advisers have a role to play in making sure they are up-to-speed themselves.
He adds: “Staff within advice businesses need to be properly trained to understand how to get their work done on the new platform, without introducing additional effort and risk.
“The impact on adviser operating models and key processes that deliver the client value proposition is often overlooked and under-managed.”
Mr Russell suggests advisers should be clear on how the change in service affects their client service proposition, and they “need to do their homework” before embarking on a switch, to ensure “clients are not disadvantaged by the move”.
simoney.kyriakou@ft.com
