Platform leaders: five platforms discretionaries should be on

Platforms and wraps represent a significant channel for wealth management businesses to make their investment offerings more accessible to advisers.

This is all the more important as advisers look to outsource investment management during the run-up to the retail distribution review (RDR).

There are two strands to the growing trend towards platforms by discretionary managers. First, the option to ease administrative burden by outsourcing share and fund dealing, and second, the opportunity to gain visibility and attract assets from advisers by listing their model portfolios on platforms.

Both aspects offer firms the potential to increase the attractiveness of their discretionary service by making it more transparent and easier for advisers to administer.

Holly Mackay, managing director of the Platforum, a company that provides various consultancy services, is quick to point out that some of the larger platforms are unable to support holdings in listed securities. As many originated as fund trading platforms, functionality hasn’t always kept up with demand to cater for discretionaries, she says.

‘The problem is that platforms developed from mutual funds systems all struggle when you push them beyond collectives and traditional tax wrappers,’ adds Mackay.

‘Once they include listed securities, I am not sure whether it is a smooth process. The move to model portfolios is a good one, but there has been some operational clumsiness on platforms and some of the charging structures are too high. If a discretionary fund manager is outsourcing to a platform, their revenue expectations have to come down.’

She also says that wealth managers looking to list model portfolios on wraps and platforms should have their adviser clients and their preferences as a starting point.

‘The top five platforms typically have 76% of platform assets, but the question is about distribution, not just assets. For example, what is the discretionary manager’s target market, what advisers do they do business with?’ Mackay says.

In an overcrowded space, we look at the top five platforms that wealth managers are opting to work with.