2nd August 2012

Reflections on July - Pat's blog

After a really hectic June, July for me is a month for reflecting on the past 6 months – the FSA have been busy making decisions on platform rebates and centralised investment propositions/replacement business, the platforms have been busy unbundling and disclosing their charges and IFAs have been busy thinking about the future being independent or restricted, taking those final few exams and setting out their client service propositions ready for the new year.

For the last couple of months I have been tearing around the country in one way or another, either hosting half day roadshows or smaller roundtable events over lunch and the message is pretty consistent. IFAs have a lot on their plates in general - where platforms are concerned, most have either made their decisions (and just need to conduct on-going due diligence) or are going to “wait and see”. 

If I reflect on the roundtable events held during May/June with 26 IFAs – 27% use one platform predominantly in their businesses at the moment and only half of these advisers will be considering a secondary or alternative platform solution when it comes to doing the due diligence next time around. I think this is testament the FSA is getting their message across to IFAs and it’s being understood – one platform is unlikely to suit all clients. It is still evident however the majority of adviser firms are using 3 platforms or more – talking to over 20 firms last month 58% confirmed they use a range of different platform providers and 80% of these firms do so as a result of legacy business.

For most IFAs conducting platform due diligence is a headache – for those that use just one platform the question is should they? For those that use a variety – should they outline a more definitive platform strategy for the business? Adviser firms are all different and in my view that is why the FSA will not prescribe a checklist or a guidance list of do’s and don’ts. Each firm has different needs and requirements from a platform partner – for some it’s the technology, the admin functionality, the bells and whistles and for others its purely administration and execution. I urge you all to think about your platform strategy and how this reflects your client service.

As part of the adviser roadshows and roundtable lunch events we have also heard from a number of platform providers – Aviva, Cofunds, Aegon and Alliance Trust Savings and also from Vanguard , who all have challenges for the next 6 months too. Getting their message out is the most important – for Aviva they are starting again, their proposition is different this time and they do not see themselves as platform uno in every situation. I have spoken briefly about secondary or alternative platform solutions - it is refreshing to hear a big insurance company like Aviva admitting they got it wrong first time but “we’ve learnt from our mistakes and don’t rule us out - we might suit your “C” clients”. Alliance Trust Savings are similar – they are very well known in the direct space but relatively unknown in the advised market – this is something they are now working hard on. They also are happy to sit in the “secondary or alternative” category – they have a very different approach to charging which may suit some clients who want simple. Cofunds being a big gun spread their message loud and clear – have a core solution which ticks the majority of boxes, good functionality, price competitive and concentrate on using the systems technology to deliver a good service to clients. Finally, Aegon – they have been relatively quiet with their launch of ARC the “at retirement” platform but shared with us how they see the world as a journey of life.   We also held a number of events with the team at Vanguard – their message is simply “have a look at us” we are relatively new in the UK providing a passive fund solution which is cost effective and transparent. My point to IFAs is this market is changing – providers have strengths and weaknesses they are not all good at everything – whether its price, service, functionality, financial standing or confidence - advisers need to determine what it is they are looking for in a platform.

With the release of FSA paper CP 12/12 a couple of weeks ago – the FSA are sticking to their guns and banning the rebates platforms receive from fund managers as well as banning cash rebates to clients in favour of unit rebates. Most advisers I have spoken to are not surprised nor are they in uproar about the FSAs intensions – however this is not the same at many platform HQs! We are likely to see the emergence of clean share class’s post RDR which we hope will drive the margins down on platform pricing. The unit rebate option over cash rebates for clients is causing a stir for platforms – incorporating unit rebates for most will result in a hefty IT invoice for sure! I will be watching closely - hoping platforms have kicked started contingency plans and this is not going to be detrimental to pre-planned platform upgrades.

Before I sign off I just want to tell you all that following a long awaited meeting with True Potential I am hoping to include some of the platform functionality details soon. It has been frustrating for many of you who have asked for information on TP in the past as I have been unable to give it to you. They are a very different beast and do not hold themselves out as “just a platform” which is why it is so difficult to compare in a format such as mine. Having seen “theirs” – how the platform, services and back office all work together I have showed them “mine” and how I describe each platform, give my opinion and guidance.  I am not a platform comparison site - I provide IFAs with the detail and my expertise - I am confident this marriage will soon be consummated!

Until next time…

Emma Napier, The Platforum. Europe’s leading independent specialist on investment platforms.

Wraps & Platforms, Panacea Comment