As advisers get to grips with the platform market it will bring real benefits to how they do business. Helen Morrissey reports
The platform market has come a long way in recent years and is well on its way to becoming a vital part of an adviser's business model. While the platform market has been mainstream in markets such as Australia and South Africa for several years now, advisers in the UK were initially loath to get involved. Many advisers were concerned that adopting a platform would constrain their choice of funds and leave them tied to a particular provider. Other concerns included the lack of transparency when it came to fees. However, times have changed and the indications are that advisers increasingly view platforms as the ideal way to conduct their business going forward.
Research undertaken by CoreData Research UK (Sept 2008) shows that adviser acceptance of the platform market is steadily increasing. Of those surveyed 44.2% of advisers said they looked to start using platforms in the next six months. A further 10.4% said they would look to move onto a platform in the next 12 months. Only 6.5% of advisers surveyed said they would never move to a wrap platform.
One factor behind such a swing in adviser opinion is that the functionality now available on platforms has increased massively. While early platforms were used primarily to effect transfers of vehicles like ISAs and collectives, today's breed of platforms enable advisers to really get to grips with all aspects of a client's financial situation. Advisers have access to larger ranges of funds and they can carry out risk profiling, fund research and deliver enhanced client reporting. Some platforms even allow the adviser to do inheritance tax planning - in short the platform has become a valuable aid to how the adviser does business.
"Today's platforms are more geared towards the adviser offering a holistic service rather than merely transacting business," says Cofunds, marketing and proposition director Alastair Conway. "At Cofunds we have moved away from this transactional way of doing business and we are focused on helping advisers deliver real solutions to clients. People's needs are more complex now than they used to be. They may have multiple properties or an inheritance and they need someone to help them manage it all. We've seen a huge shift in the type of business being done on platforms with more work being done on bonds and pensions business for instance. We've also seen platforms being used to help people manage their income needs in the decumulation stage of their retirement."
The benefits of using a platform are numerous and if used properly can enable the adviser to keep pace with changes in the market as well as saving them time and money.
"When we first started using platforms we were unsure as to how they would fit the business but we now see platforms as an enabler - they help you to do business more efficiently," says AWD Chase de Vere marketing director Martyn Laverick. "For instance we are looking to adopt customer agreed remuneration and it is very difficult to do this with assets that are not held on a platform. Platforms make liaising with clients so much easier and it has really enabled us to develop the services that are so fundamental to our business and ensure we understand clients better.
"For instance if you are talking to a client about capital gains tax - using a platform enables you to know exactly where the client stands straight away before you start selling things - we are working more effectively with our clients. We've also seen an increase in client engagement with a big increase in the number of clients logging in online. They are actively working with the adviser. This adds value to the client, it adds value to the adviser and it cuts cost."
These points were echoed by Montpelier Group director Trevor Law who says that using platforms has cut down the amount of time it takes to carry out tasks.
"We find that even making fund switches online is so much quicker than in the past when you had to rely on the post," he says.
Retail Distribution Review
The advent of the Retail Distribution Review (RDR) looks set to further improve the fortunes of the platform market. Increasing pressure is placed on the adviser to evidence the reasons behind their decisions and improve administration. Research suggests they are increasingly looking towards the platform market to help them do this.
CoreData Research UK research demonstrated this by asking advisers why they chose to adopt a platform. Of those surveyed 13.5% said they moved to a platform proposition because it allowed for more unified reporting. A further 16.8% said it would help them further streamline their administration and compliance procedures.
Montpelier Group's Law can provide first hand evidence of this and he believes adopting a platform strategy has delivered real benefits in the level of reporting his team is able to deliver to clients and the authorities.
"I've been using platforms for five years or so and the level of functionality available has grown massively," he says. "I run a team of people and we can use platforms to work out factors such as client retention and managing information. We are able to record the decisions we've made and why we made them."
Things to be aware of
As platforms grow in popularity we will inevitably see an increase in the number of providers entering the market. While increased competition can only be a good thing in terms of product development Laverick urges advisers to do their research and not take everything providers say at face value.
"Initially we used several different platforms but decided to adopt a more co-ordinated approach about 18 months ago," he says. "We went through several beauty parades and what became apparent was that some providers had yet to fully develop their functionality. In the initial presentation they would say their platform did various things but on further questioning this functionality was not yet available. This prompted us to go for a more tried and tested approach. Advisers need to scratch beneath the surface and make sure providers are in a position to deliver what they promise. We wanted a provider that would grow with our business and so we chose Cofunds as they really support their advisers and they've really helped us to build on our platform."
Meeting adviser needs
So it would seem that advisers are gaining a better understanding of the platform market and how it can better meet their needs. They are no longer feeling constrained by using platforms, they are being won over by the increases in efficiency platforms can bring.
"Advisers realise that platforms are here to stay. In the beginning there was a bit of fear around them but this has changed," says Laverick. "People worried that adopting a platform was an infringement of their independence but they aren't - it's a platform that the adviser adapts to your needs - it's what you hold within the platform that determines your independence - not the wrapper itself."
However, while awareness of platforms is increasing there is still some way to go before advisers feel completely comfortable with using platforms. According to Conway providers will need to work closely with advisers going forward, not only to ensure they understand the product but also to see how it can be further adapted to their needs.
"Our business development teams work closely with advisers to ensure they know how to use the platform," says Conway. "We also attend conferences so people can keep in touch with what we are doing. However, we will be looking to extend this support over the coming year and will be looking to hold seminars so advisers can come to us with their concerns. However, we are seeing adviser's perceptions beginning to change but they really do need to embed it into the core of their business to make the best use of it rather than using it as a transactional tool. We will see advisers adapt platforms to meet their needs and deliver solutions to their clients to make their lives easier. There is huge potential. Cofunds will look to gradually increase platform functionality going forward as we identify client needs."
So it would seem that the platform market can look forward to continued growth in the coming years as advisers get used to a whole new way of working. However, it is important to note that in addition to enabling advisers to do their existing business better, using a platform will open up new avenues as well.
"You can do lifetime cash flow planning to help clients manage their costs and this opens up a whole new world that puts the adviser at the very centre of the client's finances," says Laverick. "For instance the adviser can tell the client if and where they are spending too much money and really help the clients get to grips with all aspects of their finances. It's a more holistic approach."
Joined as head of strategy, multi asset, in June
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