With major change underway in the platform sector, Financial Planner considered it timely to survey some leading Financial Planners to discover what platforms they used, how their platform usage was changing and what best practice lessons they had learned.
Our straw poll found that most firms used one primary platform and the majority said they used this platform for 90 per cent of their business. They occasionally used a secondary platform for certain clients. Platforms frequently cited included Alliance Trust, FundsNetwork, Nucleus, Parmenion, Pershing, Skandia, Transact and Sippcentre. Cost was mentioned frequently as both an important consideration for due diligence and an area for improvement while more simplification was also desired. IFP corporate member Transact was particularly popular among planners. The firm, led by chief executive Ian Taylor, was the first platform in the UK when it launched in 2001 and has retained a stronghold in the market despite more recent competition.
David Crozier CFP^CM, Financial Planner at Navigator Financial Planning, said: "We have been using Transact for many years, initially because it was the only one available but even though we review our platform arrangements every year (taking into account not just cost, but also features and service) we've yet to see an alternative that is significantly better."
Duncan Hannay Robertson CFP^CM of Hannay Robertson said: "We use Transact because it suits the client segment that we serve. One of the main reasons for choosing Transact is because they provide a service and don't try to own the client. It is a genuinely two-way relationship. They have set themselves up to always be accountable. If they don't deliver we know we can walk away and move to someone better. "
Other planners we spoke to were members of networks; David Gibson CFP^CM from Gibson Financial Planning used True Potential while Chris Bowmer CFP^CM from Fortitude Financial Planning used Nucleus as his main platform.
The former Financial Services Authority (now FCA) stated last year that Financial Planners could struggle to define themselves as independent if they only used one platform and this is something many planners have taken on board.
Mr Bowmer CFP^CM said: "We have used Nucleus since 2008. We chose it because it has simple, low charges and an admin system that works. We do use other platforms as required and have used Transact, Skandia, Fidelity and Cofunds in the last few years for specific reasons. This is not for segments, just for specific client needs."
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Fraser Donaldson, head of research at Defaqto, said: "There's several reasons you should use more than one platform, in no specific order. The FSA, now FCA, stated they don't believe an adviser can use only one platform. It's wise to have more than one platform for different types, perhaps one for transactions and one that offers a wider range of tax wrappers. Secondly, it's good business practice to have more than one. Simply because if something happens then you have another one integrated already. This buys time to have a look for another. Occasionally you do get one that disappears from the market so it's good to have one in reserve.
"Finally, every platform has different charging structures. Some will be suitable dependent on the amount of assets you put on there for example, they might not be suitable for a few thousand pounds but be quite economical with over £1m. It's not always easy to check the cost but you should be able to get an idea."
Some of the largest platforms in the UK are well-known like Standard Life and Fidelity Fundsnetwork and Philip Challinor CFP^CM, director of Chatfield Private Client, said clients were often wary of using smaller or less well known platforms. He said: "Transact and Sippcentre are not household names so that takes a bit of explaining to clients who nowadays want to know what would happen if they went bust."
Mr Donaldson said: "The two firms who have left the market, Macquarie and AMEX, didn't quit because they went bankrupt. They went because they were large companies that decided they didn't want to play the platform game anymore. With this in mind, platforms are popular because assets are ring-fenced and therefore not exposed when providers quit; there will be little gaps when assets are moved around but clients don't have to worry about losing their assets."
So what do Financial Planners recommend considering when choosing a platform? There have already been indications that the new Financial Conduct Authority platform paper PS 13/1 will mean more due diligence will need to be conducted prior to choosing a platform.
The FCA wants advisers to satisfy themselves that a platform service provider has met the remuneration requirements in the paper and does not present products with bias. The remuneration requirement states that rebates are banned and platform services must be paid via a platform charge which is disclosed to and agreed by the investor.
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A survey by Skandia which questioned over 550 advisers found that charges were ranked as the most-important factor followed by platform functionality and reputation of the platform itself. Areas deemed of less importance were range of funds, range of asset classes and accessibility.
All the six Financial Planners surveyed cited the importance of costs and charging when choosing a platform.
Mr Challinor said: "Put some of your own money on there to see how it works. If you're not prepared to do that then you shouldn't be recommending them to your clients. Only choose platforms that are profitable, why on earth would you want to work with a provider that has never made a profit?"
David Gibson CFP^CM of Gibson Financial Planning, said: "Aside from comparing costs pay close attention to how well the platform works for you. No point selecting the cheapest solution if it is poorly designed and clunky to operate."
Jason Butler CFP^CM, director of Bloomsbury Wealth, said: "Decide whether or not you will manage portfolios in house or on a discretionary basis because that dictates the functionality you will need, make sure the provider ticks all the security, size and functionality boxes and make sure the costs are reasonable, whether you pay these yourself or the client pays the provider."
Others cited the future risk of consolidation in the marketplace, the most recent example being the acquisition of Cofunds by L&G in May. Mr Crozier said: "Satisfy yourself as far as possible that the wrap is going to be around before you embed it too deeply in your process - there is no doubt in my mind that there is going to be consolidation."
The cost of a platform was mentioned again when Financial Planners were asked what platforms could improve on with several stating that firms should "keep costs low". Other features which could be improved were more simplification and more integration with mobile technology via apps and online accounts.
Mr Challinor said: "The fact that clients can access their accounts online is essential and these days platforms need to have an app. Sippcentre only manage this with their direct to consumer offering and apparently Transact are working on it."
Mr Hannay Robertson said: "Provide a better end of year report, separate the investment transactions/statement from the tax pack, improve the tax pack and include both the income tax details and capital gains tax details. Provide a better investment report but keep it simple and focus on the asset allocation. Give the adviser the choice of printing a simple report or complex report. Keep on evolving with the market."