Investments  

Providers must raise their level of service

This article is part of
Platforms Special Report - November 2016

Providers must raise their level of service

After a relatively quiet few years, the platform market has stirred into life again with the announcement of two big deals involving Cofunds and Elevate.

While these two changes are not the frenzy of consolidation that other market commentators had predicted, they do raise questions for the advisers and customers concerned, as well as the market in general. 

The future of the platform market is not as simple as saying, ‘30 platforms are too many for the market to sustain, so it will move to around 10 providers’. 

It is more nuanced than that, with every provider needing to be assessed on their own merit and strategic direction. 

For advisers this is not an easy task. Financial strength and scale form part of this assessment. But as the recent changes have shown it is more likely to be commitment to the market, or lack of it, that is the catalyst to a merger or acquisition. 

When conducting platform due diligence, the two overriding considerations are: ‘Is this platform a safe home for my client’s assets?’ and ‘Are they able to provide me with the level of service I need to be able to deliver my own service proposition to the client?’ 

Commitment to the market cuts to the heart of both areas, but by breaking it down into these two categories advisers can develop a process that will ensure the right level of assessment is made as to a provider’s suitability, with clear selection criteria and measurements in place. 

This is not about taking a deep forensic view of a provider’s accounts, it is about considering what you and your clients need from a platform, and ensuring a suitable recommendation is then made. 

Safe custody of the client’s assets is probably top of most adviser considerations when conducting due diligence. 

The financial strength and commitment to market of a provider will have a bearing on this. However, the reality is that in most instances there is little danger of catastrophic client impact.

If a provider decides to exit the market and is acquired by a rival, then little changes in terms of the security of the client’s assets. In fact, with the ownership issues now being resolved you could argue that things may well have improved. Even if there is a distressed exit, the regulatory protection is strong. 

Irrespective of their financial strength, all platform providers are required to have an exit plan in place. This plan has to demonstrate how they would treat customers fairly in the event of an exit, and capital adequacy is set aside to fund this plan.

The worst-case scenario is that the client will be forced to move to another platform, but it is unlikely they would be disadvantaged by the move, or incur any costs. 

Of more concern to advisers should be the level of service being provided by their platform of choice. This is where the commitment to market, or lack of it, will be felt by the advisers, their administrators and paraplanners and their customers.