Hiren Patel: Why IFAs 'can't get no satisfaction' from model portfolio service tech

Lennon and McCartney, the Gallagher brothers, Jagger and Richards.

Like all of these great partnerships, the relationship between asset managers and platforms is a complicated one and often leaves IFAs and their clients picking up the pieces.

On the one hand, they continue to offer fresh innovation to financial advisers. Just look at how the vast majority of platforms have facilitated an accelerated introduction of ground-breaking technology in the face of the ongoing coronavirus pandemic.

Features like digital signatures and "intelligent office" now let advisers invest on their clients' behalf and offer an uninterrupted, paper-free service in a time when face-to-face contact is not possible.

On the other hand, just as with each of these legendary songwriting duos, asset managers and platforms don't always see eye-to-eye.

Historically, one of the greatest problems for the two has been the fact that each platform offers a different range of investment choices. 

As a result, it is very difficult for model portfolio services to provide a uniform offering to all of their underlying clients. Instead, IFAs looking to onboard clients to a centralised investment proposition can find themselves substituting one of the funds, stocks, or other assets their clients hold for the nearest similar alternative.

In short, their pure model is compromised and IFAs can often find themselves servicing several clients across several different investment platforms. That's a lot to manage when you consider the number of platforms available and the number of potentially diverse client holdings.

Future investors

The investment industry has, for many years, been asking itself what the next generation of investors want and need. The problem is, the ‘next generation' we've been talking about is already here and many individuals now rely on efficient apps and reliable platforms on a daily basis whether to bank, shop, book a holiday or even buy a house.

Demand for and expectation of quality service providers is higher than it's ever been and IFAs should be able to spend less time on the administration of their clients' accounts and more quality time on wider financial planning efficiently under one uniform offering. Essentially, substantiating the ‘S' in MPS.

One of the big issues levied at platforms throughout the lockdown has been the slow move from ‘wet' to digital signatures.

This is but one issue and while many have now solved that problem, one major problem still prevails across many (though not all) platforms - every time an asset manager alters one of their model portfolios, they must input the trade or trades into each of the separate platforms on which their products are available. Consider also that each platform has a different interface, so the practicalities of using one platform rather than many should be clear.

The issue for advisers is whether their clients are getting like-for-like when these models change and whether their clients would benefit by consolidating all their holdings on one, pure platform.

See, as offerings have emerged over time, these IFAs will have found themselves with clients on numerous platforms. The reasons for this vary; for example, new platforms will have developed over the years with greater choice and flexibility, or a lead will have come to them with a preference for or an existing investment in a particular service.

Whatever the circumstance, the net result is the same - an adviser using one model portfolio service across their entire client base still cannot guarantee that all of their clients are receiving the same service.

When dealing with a client, IFAs must check what platform they are on and exactly what they have exposure to as a result. After all, a like-for-like swap between platforms could have a severe impact on performance - especially in turbulent times like these.

Whether or not an adviser begins to move their entire client-base to one platform is down to them. The fact remains that if they use a model portfolio service available on only one platform, they know that every client using that service will receive the same exposure and performance. Of course, it has to offer a wide range of portfolios to meet each risk profile across an IFAs client base.

This year's market turbulence has exposed some long-standing technical issues in investment solutions but maybe it could be the catalyst to propel the industry forward for the better - advisers, platforms, and asset managers alike.

Reimagining the adviser model

Quite apart from all of this, there are cost implications for clients on multiple platforms and with the topic of fees continually in the spotlight, consolidation of client accounts surely helps to bring these costs down.

Our observations of the inefficiencies of current offerings and the complications around dealing with multiple platforms have led us to look to the future, focusing on what IFAs and end-investors really want to make their lives more efficient and cost-effective, driven through one platform, integrated with their own CRM.

Advanced tech with access to the full range of investment options -like-for-like. Transferring clients in one click and the elimination of paper-based account management, no erroneous charges for cash held in tax wrappers, the ability to manage pension drawdown online, digital signatures, the list goes on… These are things that in today's digitally advanced and savvy world, should be a prerequisite, not a ‘nice-to-have.'

As the focus on sharpening up offerings to enable efficient remote servicing of clients continues to grow, we expect more asset managers to limit the platforms they use in response and consolidate clients on platforms that can offer pure, holistic solutions with like-for-like investment capabilities in a cost-effective way.

Removing such a long-standing inefficiency will move the relationship between asset managers and platforms into winning territory and would, no doubt, come as music to some ears of IFAs and their investors.

Hiren Patel is managing partner at Garraway Capital Management

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• Topics
• Technology
• Wrap/platforms
• IFAs
• Hiren Patel
• Garraway Capital Management
• model portfolio service
• Platforms