Alex Funk acknowledged restricted advice models are evolving, with more advice firms owning their own platform and even some of their own investment products.
“This model isn’t necessarily bad, as it gives advice firms more of an ability to control things like pricing,” said Funk.
“Unfortunately, some of these models are about a grab of good margin…But good client outcomes have to be satisfied.
"When I look at the mass migrations happening across the market, I find it hard to see this satisfied every time. They aren’t always the best outcome.”
Speaking at a media conference, Funk said unless advice firms can offer better products, service, and a smooth migration alongside lower fees, he would seriously question the motivations of advice firms to move to a restricted model where they have more control.
Custom platform provider Seccl is priced at 10 basis points, and goes down from there. Comparatively, the cheapest advised platform provider charges double this price, at 20bps.
Some advice firms also use Multrees, which offers a layer of management on top of the platform. Using its technology, Wills and Trusts Wealth Management typically charges a 0.1 per cent fee to operate the platform, and 0.1-0.2 per cent for its discretionary fund manager.
While Funk acknowledged the serious savings advice firms can make operating this model, he said the incoming Consumer Duty would throw fresh scrutiny on them and how firms handle the migrations.
Seccl's chief executive and Nucleus founder, David Ferguson, responded to Funk's comments, saying advice firms owning their own platform is "a clear win" for customers.
"This can play out several ways," he told FTAdviser. "But ultimately the ability for those closer to customers to have greater control, to build on something genuinely digital, and to disintermediate the substantial costs of corporate platform owners, should create a clear win for customers and advisers.”
Multrees chief commercial officer, Andrew Back, also responded to the comments. He said the motivation for high quality advice firms his firm is talking to "is rarely, if ever, about 'margin grab'".
"Rather, it is about better controlling and improving the client service that they deliver leading to improved consumer outcomes," said Back.
"In our experience advisers are increasingly looking for flexible technology, matched with a strong service solution.
"With growing pressures on advisers' time, they will need to be assured that their technology not only works as it should, but that it is fully integrated into their proposition and backed up with support where required."
Wills and Trusts Wealth Management's founder, David Batchelor, argued advisers are usually closer to clients than product providers and so are in a better place to design a platform that meets their client needs, where platforms will always create a mass market generic product.
Batchelor explained: "For example, if you focus on the more mature clients (say age 60+), then you will build a very different set of features compared to those that are building a platform, that is designed for the GPP market.
"Advisers building their own platform do not need the platform to make money, if it is not a profit centre. All of the commercial platforms need to make money to satisfy their owners. An IFA-built platform can be run at cost as there is no need to use it to generate income."
As the world of IFA’s reduces in size, Batchelor reckons IFAs will come together to develop economies of scale in a "co-op" type way.
"This is in fact what we have done. There are 20 or so firms which are using our discretionary fund manager and will be able to migrate clients to our platform when we think it is ready. The group gets together quarterly to work on best practice and developing more client focused solutions and products than a provider may create."
Some restricted advice models have also emerged out of recent merger and acquisition activity. Earlier this year, Aviva bought advice firm consolidator Succession.
Being a platform provider, many highlighted the restrictions such a deal could place on Succession's advisers if they advise on products on their owner's platform.
Initially, Aviva’s chief executive officer of UK & Ireland Life, Doug Brown, suggested a platform migration of Succession’s advisers to the Aviva platform could be on the horizon.
Currently, Succession clients use a handful of platforms, including a white-label Acsentric platform.
But Aviva’s strategic platforms director, Mike Hogg, has since confirmed it will be Succession’s advisers - not Aviva - who decide which platforms their clients end up on.
An Aviva spokesperson said Succession already has a platform is uses, and that Aviva has its own adviser platform "which we think is extremely strong".
They added: "We think we have a strong offering across our platform and asset management capabilities and we will work with Succession Wealth to determine the best proposition for their customers and advisers.”
ruby.hinchliffe@ft.com