PLATFORMS have been making something of a comeback in the fashion world lately and in 2013 the investment world began giving its own particular models a makeover that is predicted to continue well into 2014.

New propositions, changes to pricing, technology and market share have featured as Financial Planners prepared for a new world of doing business. The main impetus for the redesign has been regulation. The start of RDR over a year ago and the platform paper PS1/13 published last summer have been shaking up the market and making charges more transparent.

Despite the increased costs for many platforms in meeting the changes, the signs are that openness and competition are helping to force down charges.

The platforms and wraps must be doing something right as even with this backdrop of squeezed margins many have begun to be profitable. And Fidelity FundsNetwork predicts that it will not be long before £300 billion of assets will be held on wraps and platforms.



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This progress may have been driven largely by demand from Financial Planners and advisers transferring more assets on to platforms to keep their own costs down - and Fidelity expects more life insurance assets to flow across.

The adviser-owned wrap Nucleus boosted its turnover by 39 per cent to £13.6 million in the nine months to October 2013 and turned a small loss into a £1.4 million profit. Ascentric, owned by Royal London reported its best ever quarter in the first three months of last year.

Mr Mark Polson of the consultancy Lang Cat, says the brave new world of RDR has affected different platforms in different ways.

Mr Polson said: "For the unbundled wraps and platforms such as TrustNet, Nucleus and Novia it was business as usual as they were already working in a post RDR way. For other such as FundsNetwork, Skandia and Cofunds it has not been so easy.'

He added: 'Skandia had a torrid first quarter of the year. Service slipped and they were late with post RDR pricing. However it apologised and concentrated on fixing things and turned it around by focusing on the core processes that advisers use every day."

Pricing was the prominent theme in 2013 with players either cutting or introducing new propositions - and it will continue. With platform giant Hargreaves Lansdown announcing in January 2014 price cuts for many DIY investors, there is likely to be further reductions in the advised market too. Some observers doing the complex sums suggest that DIY clients with bigger portfolios will pay more in future with HL, which could possibly work to the advantage of financial planners if some of these decide they might as well get advice if they are paying these prices. Mr Jason Witcombe CFP CM of planning firm Evolve, says: "It might direct a bit more money towards advice."

He is pleased there is a general downward trend on pricing. He said: "That is good. But planners may have to explain more to clients about how platforms work. They think they make everything easy but it is not as straightforward as that." He estimates Evolve uses about eight different platforms. Mr Witcombe said: "They are all a work in progress but we use different ones for clients with different wrappers. For financial planners there is a delicate balance between functionality and cost. Some will pay a bit more for functionality but for the regulator's point of view if you give a client a range of funds that are offered by several platforms they need to justify themselves if they are not using the cheapest."

Lang Cat compiles a platform pricing guide and in its latest, published last summer Mr Polson points to some noteworthy changes, such as the reduction at Aviva (to 0.25 per cent for ISAs), Zurich (to 0.225 per cent), AXA Elevate (to between 0.4 and 0.28 per cent) and a targetted cut at Transact on portfolios of between £100,000 and £300,000). In October Cofunds, following the completion of its takeover by Legal & General, dropped a £40 annual platform charge. He said: "That's good as it acknowledged that someone like Cofunds is aimed at people with more modest portfolios, particularly ISAs and is priced well at this group, along with Aviva."


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At the other end of the market, such as at Nucleus, there was action on prices too. The platform, which hit £6bn of assets under administration in October, implemented changes in November which cuts prices for portfolios of £500,000 plus and means the costs are halved for clients with assets of between £1 million and £2 million.

Other developments last year at Nucleus include the platform adding trusts, partnering with Spire Financial to launch an annuity portal and adding Origo's Options Transfers system to manage the platform's re-registration and asset transfer services.

Standard Life launched a major platform programme last year and was the first to respond to the HMRC's taxation of rebates and to announce it was negotiating with fund groups to offer discounted - 'super-clean' - funds on the platform. Plus it began to offer bulk conversion of clients into clean funds, well ahead of the 2016 deadline. It also re-priced its offering so that, for example, those with less than £100,000 pay 0.4 per cent while those with £1 million plus pay 0.1 per cent for ISAs and 0.55 per cent and 0.25 per cent for Sipps and bonds. Bigger discounts are on offer for the bigger planning firms.

Mr David Tiller, Standard Life Head of Platform Propositions, says that if 2013 was a year of regulation then 2014 could be a year of polarisation. Mr Tiller said: "Platforms have responded quite differently to the regulations. One group of platforms have built or are building unit rebating, rebate tax collection and reporting functionality and require advisers to self-manage the conversion to clean funds. The other group are converting or have converted to clean themselves. Given the Financial Conduct Authority's desire for the industry to become clean and transparent, the pressure is on to get clean. So why has the industry not converted lock, stock and barrel to clean funds?"

He suggests that where platforms have legacy tranches or are funding the platform fee from the fund rebate there will be "more to unpick". Similarly, he reckons that platforms that have worked with advisers on the adoption of adviser charging will find the transition to clean funds far easier. Mr Tiller added: "In 2013 platforms have been wrestling with this complexity behind closed doors. In 2014 the impact will be felt across the industry. For advisers using platforms that have completed a bulk move to clean funds like we have, the regulatory disruption will be over quickly."

Mr Tiller believes that for firms 2014 will be about planning, risk management and dealing with complexity. He said: "Advisers need clear plans for converting clients and funds to clean given the disruption to their central investment proposition processes and the potential for treating customers fairly issues and errors. The coexistence of legacy pre-RDR share classes and clean share classes in client portfolios creates complexity and costs."

Although prices are inching downwards, Mr Tiller is confident there will be 'no platform price war'. He said: "This is because platforms still require significant on-going investment to meet the demands of regulation, capital adequacy and advisers."

He expects 2014 to focus more on 'total cost of ownership' and that planners will spend less time talking about regulation and more time actively developing their businesses.
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Mr Nick Lee, head of strategic partners at AXA Elevate certainly believes this year will differ from last. He said: "Last year saw changes within the industry following the publication of the platform paper in April. The year then followed through with the accelerated introduction of clean share classes in a bid to make investing more transparent for the consumer. By the end of 2013 we were seeing over 75 per cent of inflows onto the AXA Wealth Elevate platform going into clean share classes. Everyone was embracing the 'new' RDR world, and coming to terms with new ways of working, new segments of clients and new strategies of charging for advice."

As for the platform providers themselves, he believes 2014 will be more of a work planning period. Mr Lee said: 'Technology is going to be the space to watch in the next 12 months, this will include platform upgrades, compatibility with mobile devices and integration with adviser technology – in fact anything that helps advisers better service their clients and make their own lives easier."

He also foresees that planners will also be focusing on re-registration. He said: "Many interested parties want an IT binary solution to support the kaleidoscopic re-registration of all clean, mirror and rebate paying funds before April this year."

Execution-only platforms are likely to feature on a planner's wish list during 2014, Mr Lee predicts, as more take on board the difference between 'help and guidance' on execution-only platforms and 'advice'. He said: "This will meet a very distinct customer need." The cost-benefits of using platforms will also be on planners' minds this year with them being "ever more conscious of the value they add to their business".

Mr Adrian Shandley CFP CM of Premier Wealth Management, fears that contrary to the suggestion that prices may continue to fall that they may in fact rise in 2014. His view is that despite competition charges may rise as a result of the changes in share classes. He said: "Although the net result may not be higher costs, the client will perceive it as such." He believes full wraps are becoming more attractive, however, than the more pared down platforms, suggesting that in many cases the costs are similar. He said: "Equally the administration and the management of wraps is simpler than platforms in many cases."



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He predicts a rationalisation of the platform space with the market more dominated by wraps. Mr Shandley added: "The problem with many platforms is the fact that they are starting to look like the poor cousin to "wraps" and when a comparison of cost is made the restrictions of platforms are often not worth accepting.

"With the unbundling of shares classes and the change in charging structures platforms are coming very much into line with wraps, but do not have the ability to hold many of the Investments that wraps can - cash, ETFs, legacy investments and so on." The paperwork can also be "burdensome" he says. Mr Shandley said: "With the changes in share classes, the changes in remuneration, the unbundling and the rest, clients are being bombarded with an endless stream of paperwork by platforms. Some platforms are causing advisers an endless amount of work for no extra remuneration simply to change client accounts and practices to conform with the platform requests. This is becoming tiresome. If platforms are to compete with wraps they need to broaden their range and include investments such as ETFs."

Lang Cat's Polson believes 2014 with feature three platform themes: charges, development work on usability and a move to more bespoke offerings. Mr Polson said: "Some wraps have too many bells and whistles. They need to turn off some of these. They're just plumbing and to lose some that can cut costs right down. Paraplanners are very influential in firms as they are the ones that need to be able to use the platforms."

Mr David Ferguson, chief executive at Nucleus, said: "While RDR was pretty much a non-event for many readers of Financial Planner and the platforms used by those firms, 1 January 2013 heralded a completely fresh start for huge chunks of the industry, on all sides.
"Whether advisers trying to prove their new business model, fund managers trying to resist the pricing pressure brought on by greater transparency or old school platform scrabbling to understand the requirements of modern advice businesses, we are now well beyond the start date." Ferguson believes 2014 will be remembered for "the advisers that passed their exams but didn't have a business model, for the fund managers who shrank as they could no longer buy distribution and for the platforms that continued to slump in spiral of confusion". But he is confident it will also be remembered "for platforms that would rather deliver great infrastructure to progressive advisers rather than flog funds on behalf of fund management groups".

• Sally Hamilton is deputy personal finance editor of the Mail on Sunday





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Key Points

•2013 was a year of adjustment to regulation, from the all-encompassing influences of the post RDR world to the demands of the PS1/13 platform paper.
•2014 will see assets under management on platforms exceed £300 million as more Financial Planners and advisers use them help manage their businesses more efficiently.
• Platforms prices already began to dip last year but are likely to continue on this path as the sector becomes more profitable, competition hots up and players focus clearly on their target client profiles.