Platforms will become obsolete. There will be a time when adviser firms will offer a fully integrated service. But until the Financial Conduct Authority (FCA) has thought the whole evolution of platforms through, advisers and platforms will be yoked together.
At the moment, the platform is the back-office engine that allows the wheels of advice to turn. It has increasingly become an important part of how retail investment products are accessed and administered by both consumers and advisers.
But because the client pays for the platform, we need to strike a balance between the cost for the client and the service the platform allows the adviser to provide.
To that end, I wonder when my back-office system will morph into a white-labelled platform, where I can cut out the platform provider and administer a client’s entire investment with any number of integrated product providers.
In search of an answer, I carefully read the FCA’s investment platforms market study terms of reference in July, to see what angle the regulator was going for.
The regulator’s use of the expression ‘value for money’ seemed to me, disappointingly, to show an overriding concern for cost. But I have yet to see values listed with a cost attached to them.
How do you value the time saved by an investor to log in to one platform account and view their entire portfolio against the time it takes to log in to various accounts? Add to this the time saved for a busy person running around after children or having only the commute to work to look at their portfolio. Then factor in the loss or gain of the portfolio because no action was taken when they gave up after a third failed login attempt.
It is time an academic institution carried out a proper cost benefit analysis that incorporates all these factors, so we can start to put cost and value in their proper place.
I use Intelligent Office and its client app Personal Finance Portal. Like most advisers, I am keen to keep platform costs down where there is a viable alternative, such as a lower cost or flat fee. To this end we carry out an annual costs and charges analysis.
But I still feel a certain hesitation about moving portfolios between platforms for a better deal because of the time it takes (and is still taking) platforms to manage an in specie transfer.
No one likes losing business. But in my experience, it is the ceding platform that is putting obstacles in the way. I do not know what a platform will ask for next and what exactly is required. Above all, it is time-consuming.
This is not about platform competition on price; this is about empowering advisers to make those changes without undue obstruction. That requires the FCA to have service level agreements in place for platforms or make the platforms face a fine.
The FCA’s Handbook says a platform is ‘a service that is neither solely paid for by adviser charges nor ancillary to the activity of managing investments for the retail client’. I would be happy to include my customer relationship management platform charge in my service fee, but since the retail distribution review, the adviser service fee can be cancelled at any time. How does that work? I could be out of pocket providing a service no one is paying for.
Until we have comprehensive analysis, advisers and platforms will remain intertwined.
Susan Hill is a chartered financial planner at Susan Hill Financial Planning