Platform selection is still high on the agenda of the FSA and advisers across the country. Whether the FSA’s stance in relation to single/multiple platform use has been clear is potentially a bone of contention. However, the regulator has offered guidance on what advisers should consider when adopting them.
In its 2008 factsheet, Platforms: using fund supermarkets and wraps, the FSA suggested that advisers consider nine points about the platform they are intending to recommend.
These points comprised financial strength, terms and conditions, functionality, accessibility, tools, support services, the range of funds, wrappers, products and asset classes available and, of course, charges.
Charges are a major consideration for any firm looking to adopt platforms, but encouragingly – and in line with the guidance mentioned above – advisers are taking a number of other factors into consideration when comparing the options.
In addition to client-specific information, advisers seem to be using so-called value-added services on offer.
Different resources are available to facilitate accurate comparison and help conduct due diligence. To offer an indicative view of the selection process, we have taken a snapshot of over 7,500 pieces of research to determine the criteria important to advisers when researching the market.
This is adviser and paraplanner research conducted using Capita Financial Software’s Synaptic Research system and findings are based upon comparison of 20 charging structures from 18 platform operators with Axa Elevate and Fidelity offering variations on their standard platform terms.
We have combined this research with our own insight, following discussions with advisers, and a look at what is on offer from each of the platforms available.
Research relating to the Zurich Intermediary Platform is not yet available due to its recent launch; however, investment comparison data has been included.
The research process
Before we delve into the research findings, it is worth noting that there is not a single or prescriptive research process which must be adhered to. Therefore, we see advisers and paraplanners using the system in different ways.
Some conduct end-to-end research, starting with the input of client requirements, conducting ‘filtering’ by comparing platform features and concluding with the recommendation of a single platform, including production of a suitability report.
Others use the system as a reference point to ascertain specific information relating to platforms, for example, which funds and tax wrappers are available.
We are often confronted with the statement “surely research can be manipulated to reach a desired conclusion”. In essence, this is true. However, our response has always been the same. Our duty is not to define how advisers research products (and platforms) for clients, but rather to facilitate a fair and accurate comparison of options. It is for this reason that the data is supplied and validated by platform operators and product providers.
A trend we often see when analysing Synaptic data is the disproportion of male vs. female clients and this continues when looking at platform research. Of the sample, 62 per cent of research was conducted for male clients, with an average age of 57. Female clients accounted for the remaining 38 per cent, with a slightly older average age of 60.
Investment choice is undoubtedly the most popular of the criteria used by advisers and perhaps unsurprisingly, stocks and shares Isa was the most commonly selected tax wrapper throughout the sample.
Section 32, executive pensions and small self-administered schemes accounted for only 1 per cent of selections. Discretionary investment management was selected 10 per cent of the time but this is likely to increase.
When we take a look at the number of investment types selected, it is interesting to note that as much as almost a third of research included selection of only one.
Items used to compare options
Financial strength continues to be an important consideration for advisers with 52 per cent of research including the ratings from AKG.
In addition to investment selection and specific features, such as platform opening methods, desirability scoring (based upon an amalgamation of all ‘non-essential’ client criteria) and funds linked were used as comparison criteria.
Additional platform services
The provision of tools has enabled platforms to differentiate themselves from on and off platform competition and these days most are functionally rich, offering services such as back-office integration, risk profiling, research or fact-finding tools.
Discussions among advisers have arisen relating to these tools, specifically whether alternative, independent systems should be sought to prevent ancillary services defining a firms’ platform strategy.
This rationale also points to reducing potential administration headaches associated with changing platforms, should a more suitable option become available on review.
Whatever the correct approach is, platform tools remain of interest to advisers with 65 per cent choosing “tools and reports” availability as important.
Within the Synaptic Research universe, tools and reports include on platform functionality – usually online facilities – which benefit either advisers, their clients or both.
During this part of the research process, users can choose multiple options and selection will ‘filter out’ platforms not offering the feature.
Portfolio rebalancing was the most widely selected tool, with 44 per cent, and it is for this reason that 16 of the 18 platform operators included in the research offer this.
Fund analysis tools came second (36 per cent) proving why all but one includes this on their platforms.
Many offer fund research capabilities from Morningstar and/or FE.
It is interesting to see risk profiling tools being selected in over a third of occasions although it is still not clear whether the tools separately assess a client’s capacity for loss, in addition to their attitude towards risk, following the FSA’s guidance in this area (‘Assessing Suitability: establishing the risk a customer is willing and able to take and making a suitable investment solution’).
Although not included as a filterable feature, back-office integration capabilities are undoubtedly a consideration and can streamline administration significantly.
Most platforms have integration links with one or more of the client relationship management systems, ranging from Capita Financial Software’s Client Care Desktop, Adviser Office from Avelo, through to Durell and Plum Software.
While this may not be the primary reason for selecting one platform over another it can have a significant effect on a firm’s decision – particularly if one platform supports integration with an existing back-office system.
Where fund sectors were specified (using IMA sector classification), Sterling Corporate Bond, Europe excluding UK and Asia Pacific excluding Japan were the top three selections.
Platforms selected in the research
When we look at end-to-end research, culminating in production of a suitability report for a single platform, the data shows that there is still a degree of subjective adviser preference applied.
As an example, while ranked first 32 per cent, Skandia was selected in 42 per cent of scenarios.
Transact was selected in less than 9 per cent of all research conducted, despite the fact that it topped the ranking comparison 27 per cent of the time.
Scenarios concluding with a selection showed Skandia, Axa Elevate and Standard Life appearing in first, second and third place, respectively.
The top 10 platforms accounted for 98 per cent of adviser selections. These results, however, do not tell the whole story and we are currently collating figures in relation to new business placed with each platform from our platform due diligence tool, Synaptic Comparator.
With the Zurich Intermediary Platform now launched following a series of delays, it will be interesting to see how the selections and volumes change over the next 12 months.
With the RDR now in force, it will also be interesting to find out what the platforms have up their sleeves to keep up with legislation and advisers’ evolving needs.
In the meantime, it’s reassuring to see that while cost remains a major factor in platform selection, other measures of identifying the most suitable option for a client are being taken into account.
Ellen Ashcroft is research manager at Capita Financial Software