There is no doubt that the Retail Distribution Review has been forcing individual platforms to take a close look at what they will offer the fee-based advice market come 2013.

For this and other cogent business reasons, platforms that hitherto offered a more limited range of investment types have been extending their offerings over the past couple of years.

In January, for example, Cofunds and Fidelity FundsNetwork announced that they would be making investment trusts available through their platforms in the second half of 2012. Skandia on the other hand is reported as saying it sees very little demand for trusts at present and so will not be looking to introduce them this side of the RDR deadline. The independent wraps would say they have had investment trusts on their propositions from outset and you cannot operate as a platform in the modern advice environment without at least the majority of investment types in your proposition.

Just which wrappers and investment types each platform supports can vary widely. For example, onshore and offshore bonds are wrappers that are not supported by nearly half the platforms listed, as is the case with overseas stocks and unlisted shares. Hedge funds and structured products are investments that are missing from many platforms too.

Among the smaller platform providers Avalon Investment Services is one that currently offers neither onshore nor offshore bonds but work is in hand to add them, said managing director Harry Kerr. “A lot of Financial Planners we deal with say these wrappers are ‘nice to have when we need them’. Mass affluent clients may not need access to either type of bonds but for high net worth clients they can prove useful for tax efficiency reasons. So we are looking to introduce these wrappers in Q2, 2012,” he said.

Novia Wealth Management, which launched in 2008 and now has £1bn of assets under administration, is adding commercial property to complete its investment line up in Q1. Chief executive Bill Vasilieff says one investment the platform will accept but is not keen on offering, is unlisted shares. “What we care about beyond the quality of our administration is the security of the investor’s assets. We want first to know we understand the asset, then to know it is as liquid as possible and there is not going to be a hard and long process involved in trying to get it back for the investor.”

Both Avalon and Novia support structured products, with Mr Kerr noting increased use of the products in Sipps - but one reason many other platforms do not, Mr Vasilieff believes is that “they are not properly understood as an investment”. However, with usage growing platforms will have to provide access to them or risk getting left behind. But in practice, how important is it to have access to the whole of the investment market? Does it not depend on the Financial Planner’s client bank and the investment model of the individual firm?

Capital Asset Management uses the Standard Life Adviser Wrap. The company changed its investment strategy to a passive one to specifically reduce costs for investors and launched five passive risk-rated model portfolios in February 2011, said chief executive Alan Smith MIFP.

“We don’t use many onshore bonds, for example, but every now and again we have a client who is best served by using that vehicle. Also, there are times when we might want to set up regular contribution Isas. Here the devil is in the detail, most platforms say they cover Isas but some can handle lump sums only. In an ideal world, you want potential access to any tradable security and the full range of tax wrappers,” he said.The company’s strategy solely uses unit trusts and Oeics, which means it does not need the all- singing all-dancing investment range that other Financial Planning firms require, said Mr Smith. But, he added, when approaching its platform selection and at review every year, the company starts from the basis that it will still require full open architecture.

Mr Vasilieff believes Financial Planners need access to the full range of investments, whether or not they use all of them. “Post RDR to remain independent you have to be able to advise on all the different assets. I don’t think anyone can do that now without using a platform. It would be too onerous. Which means platforms should be able to offer access to all those investment types,” he said.

Investment Quorum chief executive Lee Robertson MIFP agreed. The company offers both advisory and discretionary investment management and uses three platforms to service its client base. They are Transact, mainly for its advisory clients, Seven Investment Management (7IM) for the discretionary clients and SocGen’s platform for extra functionality in terms of multi- currency reporting.

As discretionary managers Mr Robertson said it was essential that they use a platform with the full range of investments. In this 7IM ticks all the boxes. “We have gone down the path to become discretionary managers because it allows us to deliver a far better service to our clients. The last thing I want to do is have my investment officer constrained because the platform we’re using doesn’t offer exactly what’s required to meet our clients’ financial plans.”

Mr Smith adds that although the Standard Life platform does not cover all the investment types, it delivers “more than enough for the majority of our client’s’ investment needs. For example, we wouldn’t touch hedge funds with a barge pole, so not having them on the platform is not an issue for us.”

“Also, Standard Life has its reputation to protect so largely sticks to investments with daily pricing. It cannot afford to be associated with far- flung or esoteric investments that might fail and take investors’ money with them. There is an element of protection for us in there too.”

However, he says, if his company does want to add a specific investment, “as long as it ticks Standard Life’s boxes such as daily pricing, liquidity, FSA regulated and approved and so on, we can talk to the senior management and they will put it on the platform.”

Alongside providing quick and easy access to the range of investments Financial Planners need to serve their clients on a daily basis, the major benefit to running investment models on a platform is cost, which in turn can lead to better overall performance for the client, say both providers and users.

Platforms’ purchasing scale means they are able to obtain unit trust and Oeics at institutional rates, with no initial charge and annual management charges (AMC) at a considerable discount. Typically that will reduce a 150 basis point (bps) AMC to 75bps. But if the client has to pay Financial Planning fees of one per cent and platform charges of up to 60bps on top, surely that negates the discount?

Bill Vasilieff says the costs have to be looked at in the round and then compared to how Financial Planners would access the investments without a platform. He said: “Typically an equity fund would have an AMC of 150bps, with other charges of 20bps on top. We have 75bps rebated on the AMC, while platform client charges start at 50bps and reduce to 15bps once a client has over £1m on the platform. So already there can be savings to the client. But there are huge business efficiencies too. Using a modern platform a Financial Planner can create a client account, pick an asset and transact within five or six minutes. Imagine the work involved in buying six funds from six different fund managers in comparison.”

However, where platforms can deliver specific value is when portfolios need rebalancing or funds need switching. Finding a platform that includes these functions within the annual platform charge, can provide considerable savings for Financial Planners and their clients.

Both Novia and Avalon undertake automatic rebalancing of portfolios within their annual charge. “Once the portfolio is on the platform, the planner can tick a box, say for a quarterly rebalancing, and we will automatically rebalance it, “ said Mr Vasilieff.

There are a lot of functions and efficiencies that a Financial Planner will get through a wrap for which the cost would be prohibitive or they simply could not do otherwise, such as rebalancing and also giving clients additional benefits such as 24 hour access to client portals. “This is functionality which I would not be able to afford to provide if it wasn’t through a platform,” Mr Robertson said.

Likewise, Alan Smith says his company could not run its model portfolios “without using a platform.” “It facilitates the ongoing management of our portfolios. Since we use index trackers we don’t benefit from rebates but we do switch funds and we carry out regular rebalancing of our portfolios. If you have 10 funds in a portfolio and you are being charged a percentage of each fund or a flat fee per trade that can quickly add to the cost for the client. Having the ability to rebalance or switch on platform both simply and easily and without cost makes using a platform very worthwhile.”

“With no initial charge, reduced AMC and no charges for rebalancing and switching in and out of investments, even with the annual platform charge it can be a lot cheaper to hold investments on a platform,” said Mr Kerr. “This in turn can feed into the long-term performance benefits for the client.”

Alongside the move to passive investing, outsourcing of investment management is another trend being seen among Financial Planners, typically to discretionary fund managers (DFMs).

While some DFMs operate their own administration unit, at an additional charge to the Financial Planner, running the investments managed by a DFM through a platform can make for a more efficient and cost effective operation.

Traditionally a Financial Planner would have to give the assets to the DFM to invest and the DFM would have custody of those assets. Using platforms that support DFM propositions, the DFM makes the investment decisions but the platform acts as nominee and has custody of the assets. If the planner decides the DFM is not performing as expected then it is much simpler and faster to change the DFM because the assets are on the platform.

“Using a platform moves the control of the assets away from the DFM to the Financial Planner,” said Mr Vasilieff. “And since the DFM can concentrate on the investment management and does not have to deal with the administration they are often happy to reduce their costs as well. The lowest charging DFM on our platform at the moment is 25bps, whereas traditionally DFMs charge 100-125bps for a full-blown service.

“Using a platform the Financial Planner can stay in control of the assets, be seen by the client as the deliverer of value in the relationship, and pay the DFM less than if they used them direct. That’s a win all round for Financial Planners and their clients,” he said.