Developers of a new platform comparison service claim it will render the debate on rebates “academic” and increase market competition.
Capita Financial Software's Synaptic Comparator, set to launch next month, allows IFAs to compare the true cost of using a platform whilst helping them fulfil due diligence requirements.
Developed in partnership with the Platforum consultancy, the online tool will launch with the support of 16 platforms covering 85,000 funds and 124 wrappers from 46 product providers. The Platforum says it covers 98% of total platform assets.
Synaptic Comparator claims to be the only service capable of working out what the FSA refers to as the "solution cost" of a provider - or its confusing and sometimes subtle underlying charges - for different products, wrappers and funds using complex mathematical calculations.
Platforum managing director Holly Mackay (pictured) says thus far it has been "impossible" for IFAs to conduct proper due diligence on platform selection in line with FSA requirements.
This stems from the fact the headline or administrative cost bears little resemblance to the total cost to the customer. Working out the "true" cost of a platform is further hampered by varying ways of expressing charges, with some platforms using a basis point criteria and others number of trades.
Mackay says the real benefit of the tool is its ability to segregate clients.
"We have seen you cannot categorically say any one platform is more expensive or cheaper than another full stop. It depends on the client, tax wrapper, size and fund etc and this tool will show advisers there are platforms that should not be used for some clients."
Mackay says the tool will increase competition in the market place but is sceptical it will trigger a price war.
"I hope this will not accelerate the price war," she says. "But it will highlight where platforms are more expensive and will act as a very public wake-up call."
The cost of fund manager rebates are included in the tool's calculations but not separately disclosed.
Mackay thinks the regulator's proposed ban of rebates - an integral part of the fund supermarket model - is a product of the lack of transparency on platform costs.
"The FSA has come up with the proposal because there is no way IFAs can tell a customer the total cost of a platform," she says. "I think with tools such as this the FSA's aim of clarity can be achieved - so does this make rebates academic?"
Last month, Skandia unveiled also a platform due diligence tool allowing advisers to ask providers tailored questions to help with their platform selection process.
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