With RDR almost upon us, Fiona Murphy asks how advisers are engaging with platforms in the latest Retirement Planner inquiry
Survival of the fittest seems to be the by-line for platforms. FSA plans to ban fund manager rebates have led many to question whether this year means extinction for fund supermarkets, while the evolution of streamlined wraps is a given.
In addition to debates fuelled by regulatory change, this year alone we have seen the launch of a number of new offerings including a specific at-retirement proposition from Aegon, eager to compete in this growing space.
Amid such developments, are retirement planners embracing platforms or running scared?
This month's survey was carried out via email with 31 advisers taking part. Of those who participated, most (81%) said they use platforms in their business and a tenth (10%) do not. A further tenth (10%) plan to use platforms in the future.
We asked those with platform experience how their businesses have changed. One said use had fuelled the necessary move to fee base. Others said they had provided an easier route to investment management, outsourcing and building model portfolios. Meanwhile, most answers focused around flexibility, saving time and ease of administration.
One adviser said the use of platforms led to "significantly streamlined business process, reduced paperwork, and simplified fund switching."
Others were happy with increased fund choice and the ability to arrange and monitor investments without hassle.
Others praised the benefits for clients - such as client access to information and planning tools. A few agreed simplified administration and costs transformed client service with one even claiming the resultant transparency forged a greater bond with them.
While these IFAs were positive about platforms we asked whether platforms as a whole were delivering the service standards advisers expect?
The majority (88%) said yes with only 8% saying no and 4% were unsure.
Only two advisers complained. One said platforms were "high on promise, low on delivery especially with client friendly reports." Another was dissatisfied with "too few funds" and "too long to get on them" - whether this adviser meant speed of service or set-up, we were unsure.
We'd spoken to the converts, so we challenged the platform cynics as to why they remained sceptical about the benefits of platforms. One said platforms were too expensive and had "no real benefits to most clients with investments in only one or two products." Another explained, "We hold client money and have our own nominee company."
Drivers for growth
Next we asked; how much do you expect the amount of business you do on platforms to change over the coming 12 months?
Most advisers were certain there would be some growth.Two -fifths (41%) expect significant growth; while a further (two- fifths) 41% envisage a small increase. Meanwhile, a fifth (19%) believe demand will stay the same. None of the participants felt their involvement with platforms would shrink in any way.
So platform use is here to stay, but what do you look for when choosing a platform? The majority of our respondents (93%) said ease of use, three-quarters (74%) said support and over half (59%) said provider strength. A final third (37%) said ‘other', providing varied answers. Fair charges, fund choice, product flexibility and quality were all given as reasons for adviser choice.
This led us onto our final question. We asked: What needs to happen in order for the platform market to grow over the coming year? Most advisers focused on greater clarity on charging, others called for charges to be reduced.
Others expect consolidation to drive growth. At the moment "there are too many providers all offering similar [services] they will not all survive. It's about reducing the costs of buying and servicing the investment products and creating a full range of products, wrappers and trusts and comprehensive range of investments" explained one adviser.
Others said wider choice would mean greater market movements - one adviser hoped to see indexed funds, another wanted ETFs on the platforms they used.
Others felt regulation would spell change. One said "A platform is part of the package that can help you to achieve [RDR compliance]."
One disgruntled adviser said: "FSA needs to grow up - it does not understand the needs of the client - I can administer and service a wrap account for 0.5% pa - once RDR comes in, I will be unable to service other products cost-effectively." A number of advisers felt the re-registration of assets issue needed to be addressed.
One adviser felt any easing of the global economic crisis would buoy investor confidence and therefore greater platform engagement. And while another hoped platforms would go away, others felt platforms would grow organically of their own accord without any intervention.
Platforms are developing but whether they are suited to all adviser needs is a growing issue.
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