Independent financial research company Defaqto has today published a guide for advisers to help them select appropriate platforms for their business and ultimately their clients.
The volume of assets under management on platforms has now reached £150 billion. And, according to a Defaqto survey of 232 platform users, advisers are now placing a significant amount of investment business through them. In fact, 69% of advisers that use platforms are placing more than 50% of their business with them. Further, Defaqto found that once adopted the number of advisers placing 10% or less investment business on a platform is just 3%.
The Retail Distribution Review (RDR) appears to be acting as a catalyst for platform adoption. Indeed, a recent Defaqto survey of 500 IFAs dealing in individual personal pensions found that 40% are now planning a move to a platform-based approach to prepare for the RDR, which has increased from 28% of IFAs surveyed in 2009.
According to Defaqto's Guide to platforms selecting a platform can involve a long and a tough decision-making process. The guide, which aims to help advisers with platform due diligence, highlights six areas that advisers need to focus on in particular when selecting a platform:
-
Financial strength - a platform's ability to survive for the long-term
-
The costs and charges involved in using a platform. The guide outlines the five areas where charges can arise: fund management; the platform itself; tax wrapper charges, transaction costs and adviser charges
-
Tax wrappers available through a platform - for each platform, the guide sets out whether they allow access to ISAs, onshore bonds, offshore bonds, UK and overseas stocks and shares, and unlisted shares
-
Investment vehicles offered - the guide outlines which investment types are offered through each platform, across: unit trusts and OIECs; offshore funds; investment trusts; exchange traded funds; hedge funds; structured funds; cash deposits; and commercial property
-
What ancillary services a platform offers
-
The standard of service that a platform would provide to the adviser
Defaqto's guide also includes a platform adoption checklist, which sets out the key questions IFAs should ask when considering platform adoption.
Fraser Donaldson, Defaqto's Insight Analyst for Funds, said:
"There is now a significant amount of assets invested on platforms, yet this is only the beginning of the potential for platforms in the UK. Not only are more advisers using platforms, but our research has found that advisers are putting an increasing amount of investment business through them. The extent to which advisers use platforms will only increase as we move closer to RDR implementation.
"Although platforms can offer a number of benefits to users, there are many issues that need to be thought through to ensure that an adviser selects an appropriate platform for their business and, importantly, their clients. Although the platform as a product will be of paramount importance, advisers also need to consider a hugely significant but intangible issue: service. After all, they will be looking to form a long-term relationship with their chosen platform and this will therefore be crucial to the success of the partnership. Robust due diligence is key and central to this will be the availability of independent analysis to support an adviser's selection process."
Defaqto's IFA research tool - Engage - provides ratings on two key aspects of platforms to help IFAs with platform selection and due diligence:
-
Star Ratings - these ratings are based on the results of Defaqto's IFA platform service satisfaction survey and indicate the level of service advisers have experienced from the platform operators they deal with. Star Ratings give each platform operator an independent rating of 1 to 5.
-
Platform financial strength ratings - launched in December 2010, these ratings (provided by actuarial firm AKG) indicate a platform operator's ability to survive for the long-term to deliver on users' expectations.
Defaqto also provides bespoke consultancy services for IFAs, including assistance on platform due diligence.
|
