Most financial advisers are not glued to the detail of every piece of platform regulation being issued – that’s the job of platform marketing managers and, perversely, we quite enjoy it.
Many may well have heard of last year’s snappily titled paper, PS13/01, as there has been plenty written about it. The focus of the paper is on payments to platform service providers (retained rebates) and cash rebates from providers to consumers, and the rules took effect from April 6 2014.
From an adviser’s perspective this paper does somewhat raise the bar with regard to their obligations to carry out platform due diligence; it is the adviser who will be required to satisfy him/herself that a platform has met the requirements set out within the paper in the investments it makes available.
So what does that mean in practise and what options are available to help you?
A good place to start is with the regulator. In addition to the platform paper requirements, there are other documents and factsheets that should be studied.
The FCA guidance on centralised investment propositions sets out the expectations for suitability and the dangers of ‘shoehorning’. These requirements cover platforms in a wider context as much as any investment solution. The evidencing of individual suitability is all important.
This theme is reinforced in the FCA’s recent thematic review on delivering independent advice, with a clear statement on the use of a single platform within an advisory firm. The focus – in terms of independence and platform use – is very clearly on the adviser’s knowledge of the market and their ability to make informed, suitable choices.
The key is identifying the most suitable solution based on knowledge of the market and the client’s circumstances and needs.
It is important to consider your client bank. What range and type of services do you want to offer them and, more importantly, what will they value? This isn’t about segmenting clients into boxes, but giving them a range of services and propositions from which they can choose, thereby segmenting themselves. You can then start to consider what propositions or platforms can best deliver the services you require.
Having identified your service proposition, how many platforms have the functionality to power this proposition and for what cost?
Increasingly, this cost assessment is a vital step for advisers, in terms of time and money. If a platform does not have the reporting tools required, or they are not integrated into the system, then the cost of bringing in the tools and manually keying in the data will be an additional burden to bear.
It is important that any charge assessment is multidimensional, covering not only the headline costs of the offering, but also the costs incurred while delivering the required service to the client.
It is clear that the concept of ‘total cost of ownership’ has rightly become widely accepted as the most accurate method of comparing investment costs. Again, this needs a multidimensional view, with considerations made to the cost of purchase and the ongoing cost of ownership.
