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What you should know before operating your own platform

What you should know before operating your own platform
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There is arguably no shortage of adviser platforms to choose from, yet research shows that firms are thinking about setting up their own.

One in five advice firms (18 per cent) that are using fully outsourced, third-party platforms plan to launch their own in the next three years, according to NextWealth, the research and consultancy practice.

So what is driving advice firms to operate their own platforms?

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The Senior Managers and Certification Regime pushed a number of firms to consider launching a platform, says Heather Hopkins, managing director of NextWealth, as senior managers required better oversight of the advice being given in the business.

Hopkins also says the consumer duty will lead to insourcing for custody and investments. “Financial advice firms overwhelmingly feel responsible for ensuring fair value, good service, product fit and that customers understand the communication they receive,” she adds.

“They are the ones who help end-customers articulate their goals and track progress against them. This will lead more advice firms to seek to control more aspects of the customer journey.

“This doesn't necessarily mean they'll all become platform operators. It does mean they will form strategic partnerships with a smaller number of providers and rely on those firms for support in delivering the best possible customer journey.”

What launching a platform does not seem to be about, however, is extra takings. “Too much focus is put on the ability to earn revenue,” says Hopkins. “Most firms that are serious about operating a platform expect it to be cost-neutral at best. The real drivers are management information and client experience.”

Bradley Northrop, a director at consultancy Alpha, agrees, describing the revenue that advice firms receive from operating their own platform as “quite slim”. He also says the consumer duty is pushing advisers to ensure their end-to-end proposition delivers value to clients.

Citing paper statements from advice firms, platforms and discretionary fund managers arriving at different times with different branding, Northrop says: “They’ll all say different things, and it’s just a really confusing mixed up experience for the client.

“We speak to clients who are like, ‘We don’t actually know what the financial advice firm’s called’. They’ll have their money on Transact, and they’ll be like, ‘Oh, my adviser is Transact’.”

Benefits of being a platform operator

Being able to have greater control over the customer experience is one of the benefits for an advice firm operating its own platform, says Andrew Back, chief commercial officer at Multrees, a platform technology provider. This includes what and how clients pay, the type of platform experience clients receive and how clients see their portfolios.

Caldon Pike, adviser growth lead at Seccl, another custodian and platform technology provider, agrees that operating your own platform might be a good option if you want more control over client relationships.