Financial advisers have come under increasing pressure from the regulator to pull up their socks when it comes to platform due diligence.
In a review published by the Financial Conduct Authority (FCA) in February last year, the city watchdog said that many firms demonstrated inconsistent and insufficient research in the selection of platforms.
It also called for advisers to adequately manage conflicts of interest between their clients’ interests and their own after finding that, in some cases, the service that the firm received from a platform was considered more important than the service received by the client.
Evaluation
The latest study from compliance consultant Tony Catt, which presents the findings of a platform evaluation using the AdviserAsset Platform Evaluator tool produced in December 2016, aims to shed more light on how industry leading platforms weigh up against each other.
He said: “A lot of attention is put on how the charges of one platform compares to another. Yes, charges are important but the most important aspect when it comes to platform comparison is quality of service.”
A total of 19 industry leading platforms were evaluated based on ability to meet specified requirements across some 300 platform features deemed, as ‘must have’ , ‘nice to have’ or ‘not required’ for small IFA practices.
It applies these categorisations across five areas: range of funds, asset classes and tax wrappers as well as functionality, accessibility, tools and support services.
The headline finding is that Transact, which was the first wrap platform, launching in April 2000, tops the list of providers by satisfying more than 95 per cent of ‘must have’ requirements, which are considered vitally important to an adviser practice and its client proposition.
Zurich and Standard Life occupy second and third in the category, with requirement scores north of 90 per cent. Standard Life Fundzone sits at the foot of the table, recording a ‘must have’ requirement score just shy of 60 per cent.
The findings are based on the results of 3,661 platform service quality questionnaires by advisers in the past two years. The study also considered characteristics of the platform providers including their reputation and financial standing, the terms and conditions of using each platform.
The questionnaires also asked advisers to score platforms on a scale that ranges very good, good, acceptable, poor and very poor.
These scores were applied across five different areas: remote sales support, business development manager sales support; transaction processing; client reporting and support/training/help.
The aggregate result ranks Transact above its rivals in the sample. In fact, the platform came top in all areas with the exception of BDM sales support, where it was second to Standard Life.
Top five
Standard Life, Old Mutual Wealth, Aviva and AJ Bell complete the top five, overall.
The report highlights views shared by the Lang Cat which has shared in the past about a handful of platforms sampled. On Transact, the financial services consultancy firm, lauded the platform for offering detailed user experience – albeit without bells and whistles – and claims the platform trumps its competitors on product availability and functionality.
It added: “And it continues to do new things first. With Investor Authorisation, Transact is integrating customer relationship management functionality into the platform.
“This allows advisers to secure-message clients to obtain permission for multiple transaction types, including rebalances. This might not be a huge technological leap, but it is simple things like this that lead to Transact having an army of satisfied users.”
The study gave a star rating to platforms to illustrate to what extent the platform met its requirements, with five (100 per cent), four (99 to 90 per cent), three (89 to 80 per cent), two (79 to 70 per cent) and one star rating (69 to 60 per cent).
A no-star rating was given to platforms that scored below the 60 per cent figure.
In regards to the range of funds and asset classes, 17 of the platforms listed were awarded a five-star rating. The remaining two were given a four-star rating.
Interestingly, no platform met the study’s ‘must have’ requirement for discretionary fund management, while the advisers surveyed claimed the provision of ‘tools’ did not satisfy their requirements one iota.
Mr Catt said managed portfolio services have been available to platforms in the past five years, adding: “The ability to work with discretionary fund managers is becoming increasingly important for platforms because many advisers are moving away from stock picking themselves and are instead outsourcing this part of their business. Advisers nowadays simply do not have enough time to pick and monitor stocks and can’t guarantee that they can do it better than someone who does it full time.”
“Advisers and clients are asking platforms to provide certain tools that platform providers thought they would not need. Things such as asset allocation modelling and capital gains tax calculator have made its way onto many platform.”
Meanwhile, when it comes to tax wrapper requirements, James Hay, along with Funds Network, Elevate, Ascentric, Nucleus, Novia, Standard Life, Transact and Zurich recorded top marks.
Howard Spargo, chartered financial adviser at Bolton based Camargue House, said: “The availability of tax wrappers is crucial if you have a client with different areas of needs. A platform simply has to allow investments within 'tax wrappers' such as pensions and Isas in this day and age.”
On functionality, almost half of the platforms sampled were given a three rating, with only Wealthtime and Transact a five-star rating. Raymond James and FundsNetwork suffered a reverse of fortunes with a no-star rating.
Accessibility
In terms of accessibility, the report awarded a three-star rating to the majority and the maximum five-star rating to eight. Only Aviva recorded a one-star rating.
What is more, seven platforms were deemed to have fully satisfied the survey respondents’ support requirements which juxtapose the no-star rating given to Fundzone, Seven Investment Management, and Raymond James.
Daniel Britton, financial planner at Bristol-based Blue Financial Services, said: “We look at the cost, functionality and the financial stability of the provider in our due diligence process. Some of the main features we want in a platform is the ability for clients to view their assets; access to model portfolios and the ability to trade.”
“We do not rate life offices’ platforms. They tend to lack functionality and are quite clunky to use. It seems that every action requires a signature which can be annoying.”
Mr Spargo said: “We pick platforms based on our clients’ circumstances. If a platform does not have the investment proposition that best suits our clients then we would look somewhere else. We also look at further functionality that is quite neat.”
Myron Jobson is a features writer at Financial Adviser
Key points
Tony Catt evaluated a total of 19 industry leading platforms based on ability to meet specified requirements across some 300 platform features.
The questionnaires also asked advisers to score platforms on a scale that ranges very good, good, acceptable, poor and very poor.
On functionality, almost half of the platforms sampled were given a three rating.
