There is much more to platform due diligence than simply assessing the features and benefits on offer. Phil Ralli, head of platform proposition at Aviva, explains.
Considering the benefits and efficiencies gained from using platforms are eroded if an adviser adopts numerous offerings, it is unsurprising that recent research has found the average adviser uses between two and three.
I imagine this is a figure that is set to continue at a similar level.
While the trend is understandable, it does highlight the importance of the adviser’s due diligence process and, specifically, what the focus of that process is on.
Why platform due diligence demands a tougher approach
Frequently, due diligence is used when referring to platform product research, where all the features, benefits, costs and products of different platform providers are compared against each other.
This in-depth look at the available platforms on the market, identifying the commonalities and differences between them, is very important. This type of research allows advisers to select the ones that meet the appropriate needs of their business model and client propositions.
Meeting the needs of the business model is critical for a platform as it plays a fundamental role in realising the efficiencies an adviser needs to turn their charges into profit.
However, once the adviser has satisfied themselves, through the research they have undertaken, that a number of platforms meet their requirements, the real work can begin.
For me, the objective of platform due diligence is simple.
It is the same as any due diligence an adviser would undertake when outsourcing a crucial, fundamental element of their business model to a third party; in this case, the administration of their client’s money through appropriate investment products.
Due diligence should answer this crucial question: do I want to go into partnership with this platform provider? The answer to this is found by looking at factors other than the platform’s features and benefits. Advisers need to ask the following:
• What factors do I need to take into account that gives me confidence the platform provider will be here in the long term?
• What is the provider’s capability to ensure its platform is able to meet the inevitable changing regulatory and technology demands in the market?
• How do the platforms I am considering meet with the regulator’s requirement that an adviser’s platform use must be dependent on the needs of the individual client?
• What fringe benefits of the platform provider enhance the value of our partnership to me?
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