RDR: FSA warns advisers on single platform use
Share
The FSA has signalled that it is unlikely to be content with advisers using just one platform for their clients in its latest retail distribution review paper.
In the FSA’s Platforms: Delivering the RDR paper today, it urges advisers not to assume that a platform is suitable for all clients and hints that it is likely to take a dim view of advisers that put all their clients onto one platform.
The paper says: “In practice, a firm with a varied set of customers is unlikely to be able to use a single platform for all their customers. Additionally, a firm should not assume that platform services will be suitable for its customers.”
The FSA says it is good practice for a firm to segment its customers into groups with similar needs and circumstances when carrying out a due diligence exercise to assess the suitability of the services provided by different platform operators.
It says this may identify that different groups of customers are likely to be best served by different platforms.
It gives the example in its good and poor practice report of a firm which failed to take into account the impact of a platform’s flat annual administration fee when recommending investments to customers with smaller sums to invest.
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
View results 10 per page | 20 per page | 50 per page
Readers' comments (23)
Calling planet Earth | 26 Mar 2010 2:37 pm
Do these idiots have any idea what they are actually talking about or have any concept of life in the real world?
The FSA are simply a bunch of over paid morons and the sooner they go the better for all.
Unsuitable or offensive? Report this comment
How funny!! | 26 Mar 2010 2:55 pm
If a firm has done the necessary research and satisfied itself that the platform/wraps/pension/whatever is the best offering for it's range of clients then WHY can't they use that single provider??
What's the point in spreading it around??
Here's fun - let's assume (hypothetically) that 99.9% of wraps/supermarkets are cr*p, leaving one that tick all the boxes for 99.9% of IFAs/clients, why ... oh, why ... do we need to spread a large % of an IFA' s client base around the remaining tat??
Time to go, time to go ... ...
Unsuitable or offensive? Report this comment
Anonymous | 26 Mar 2010 2:57 pm
I totally agree with this, not every client can be served by a Wrap Platform as it is not the answer to every clients' needs as some specific product features via a provider may not be on offer via a platform.
Lets not forget we are independent and not tied to a platform!
Quite honestly taking cheap shots at the FSA is not going to get you anywhere.
Unsuitable or offensive? Report this comment
Anonymous | 26 Mar 2010 3:19 pm
I agree with the last comment.
In smaller cases a £51 annual admin fee for a platform can increase a TER by 33% . If this is not taken into consideration you are not treating the customer fairly.
Unsuitable or offensive? Report this comment
Ken Mac | 26 Mar 2010 3:30 pm
I don't agree with anonymous. Of course for clients with small portfolios platforms may not be required but if a platform is the right choice then it makes administrative and economic sense to use a single platform. You're not tied to a platfrom, the platform is just that, a platform. It is what you recommend to put in it that calls for your independent research and advice. The FSA could sort this in a second, simply lay down specific rules about what a platform must offer and what clients they deem suitable to use one. They won't do that of course, they will provide principals, if you are lucky, and then fine you when they decide you got it wrong.
Unsuitable or offensive? Report this comment
Mr Smug | 26 Mar 2010 3:46 pm
The law of unintended consequences states that IFA's will henceforth spread their investment business across a number of platforms, even where this may make clients worse off and systems more inefficient.
Unsuitable or offensive? Report this comment
Mr Smug | 26 Mar 2010 3:47 pm
Maybe we can have a system where we email the clients factfind to the FSA and they, in their almighty and unerring wisdom, tell us what to recommend.
It's not far off.
Unsuitable or offensive? Report this comment
Paul HArding | 26 Mar 2010 3:55 pm
Two ways of looking at this.
Of course the "independent" research an adviser performs should take charges into account, which means the same "asset-hosting"solution is unlikely to suit all clients. I can only imagine those who claim the opposite havent discovered the sometimes large cost differences between the various "hosts" or the different solutions that best suit funds of different sizes.
On the other hand, the FSA cannot have its cake and eat it. The ONGOING advice charge required to provide the same level of service to a client may increase hugely if e.g. an"information efficient" host is not used. It takes far longer to service clients who have assets all over the place - why should the other clients not get cheaper "servicing"?. Transparent client-specific ongoing advice charges will vary. Therefore, taking the ongoing advice charges into account, a particular single solution might be in every clients long term interests when the "product" they are buying includes advice. As long as its clearly explained and transaparent then there can be no problem with this and its illogical for the FSA to demand transparent adviser charging and then immediately challenge an inevitable consequence.
Unsuitable or offensive? Report this comment
High TER | 26 Mar 2010 4:08 pm
One wrap provider charges £80 flat annual admin fee (in addition to 2% total other annual charges), yet I have seen some some advisers recommend this for a £5000 single fund!!!! Clearly not whole of market and not most suitable!
The FSA has a point IN SOME CASES, though as a general rule if something is suitable then it does not matter whether you use it for 1% or 99% of clients (its just that in the real world one wrap will NOT be most suitable in 99% of cases, unless all your clients are very similar!).
I generally find that it is poor quality advisers that dislike the FSA the most and quality ones that embrace the changes! Food for discussion!
Unsuitable or offensive? Report this comment
Falkirk IFA | 26 Mar 2010 4:40 pm
When it comes to compliance - what are persistency rates and TCF - if these are compliant then there should be no issues? FSA seems to find 1 firm incompetent then we are all treated the same.
Unsuitable or offensive? Report this comment