Mark Polson: All in the family (linking)

Family linking is the way in which platforms facilitate and reward the process of advising individuals in family groups - exactly what those groups entail is something we'll come back to in a moment.

It's no surprise that this is of interest. With the advent of financial planning, as opposed to transactional advice, it's natural that firms widen their net from the client who sits in front of them to her spouse, children, grandparents, grandchildren or others.

There are many firms who now describe their business as ‘looking after XX client families'. While IFA firms haven't become multi-family offices yet, some of the techniques they adopt wouldn't be out of place in that environment.

A recent research exercise we undertook with 120 firms found that nearly two-thirds of business comes from referrals; family members are the natural starting point for that.

And now is a good time to think about advising wider families from a business perspective too. We hear from many firms that new clients who want to invest are hard to find at the moment - that's completely understandable. But there's a world of difference between extending the service you already offer one member of a family to others and convincing a relative stranger to trust you cold.

What platforms do (or don't)

Technology, and platform technology in particular, doesn't always follow adviser practice. There can be good reasons for that - there is a water's edge that most platforms shouldn't cross. Financial planning isn't the business of platforms, it's the business of their users and advised platforms are there to facilitate plans.

However, we think platforms who really do recognise the power of multi-generational advice for firms - who price accordingly and who provide functionality that simply makes it easier - will be well rewarded for so doing.

Here's what we think platforms can and should do when it comes to dealing with family groups from a charging perspective.

Charging

In our republic it's simple: platforms would allow the adviser to create a family hierarchy, much like platforms do already for adviser firms. The family therefore has an identity, but holds no accounts or assets; the members of that family group hold what they hold and the total amount is consolidated up.

The charges that apply should be for the group's assets rather than any one individual's.

Also crucial is what constitutes a family group. We think ‘family' is an unhelpful term here. What we're doing is recognising efficiencies for a group of people who, thanks to the good offices of their adviser, run their money in an anarcho-syndicalist commune in which they take it in turns to act as a sort of executive officer for the week. That's not true, but they do run it as a sort of quasi-collective. It follows, then, that actual bloodline relationships aren't the be all and end all (in fairness, many platforms already recognise this).

We think the following should be allowed as a matter of course (we'll assume that there is a ‘reference' client who is in the ‘sandwich generation').

This is our bare minimum. However, we think the main issue here isn't the relationship; it's the fact that the adviser is working with these clients in a group. So the adviser, and any adult member of the group, should be asked to confirm that they are in / happy to be part of this group and to be aware that their adviser will receive reporting and data on the group as a whole.

Trusts are important here. The trust is obviously a separate entity, but there is no reason why trust assets shouldn't be considered part of a group's wealth if the settlor(s) is or are willing to have them advised by the same firm and reported together.

The real world

Let's get into who does what. First of all, we'll use Platform Analyser to tell us who offers some form of linking. Green is yes, red is no.

So, of our cohort of 24 platforms, a handy 12 offer some form of family linking. That isn't to say that others might not offer some kind of manual deal for particular circumstances, but it's not part of their core offering. Parmenion is a good example of this; it will link clients from time to time, but it's not an every day kind of thing.

We'll move onto definitions of who includes whom as part of a family group, and how they go about it.

There are clear differences here between those who really go for linking and those who offer it as an accommodation. Immediately we can see that Multrees, Quilter/OMW, Seven IM and Zurich (now Advance by Embark) have very liberal linking policies and Ascentric and Elevate aren't far behind. Multrees in particular makes a point of not restricting groupings to family members; perhaps unsurprising given its multi-family office background.

Hubwise looks unusual - in actual fact its policy is just a little different to others in that it depends on people sharing the first line of an address. In practice this will normally be spouse/partner and children, putting it in line with AJ Bell, Transact and Wealthtime.

Standard Life Wrap is also a bit of an outlier - its definitions are relatively generous, but it is alone in insisting that one member of the group must have at least £500,000 invested to trigger linking.

Allowing trusts to form part of a linked group is fairly unusual - only Multrees and Transact allow this as a matter of policy (though Transact's is at discretion). We are aware that some other platforms will occasionally make an exception here. It's worth drawing a distinction between family trusts and individual bond investments held in trust, which are much more commonly allowed.

Given the wide disparity, an adviser looking to find a ‘home' for a family group might well be driven to select differing venues as the most suitable (in terms of charges at least) depending on the composition of the family group and the policy of the platform.

Conclusions

We're heartened that so many of those platforms who do offer family linking take it seriously. That involves not only being liberal and - whisper it - perhaps even generous with definitions of who can join a group, but also making groups easy to run and report on. We think there are some great propositions out there for family groups and the advisers serving them.

We think it's commercially smart for platforms to put effort into working in this area. From where we sit, the lines are blurring all the time between ‘retail' IFAs and wealth management. If you're managing wealth for higher net worth individuals, you will almost certainly end up working with family groups; as we said earlier, that multi-family office concept isn't far away for some firms.

Being able to deal with a group - which of course doesn't just have to be keyed to a family - in a responsive and accommodating way feels like a no-brainer to us.

Mark Polson is principal at the lang cat

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