There has been a raft of tweaks and wholesale changes to platform charging structures over recent months. Ascentric, James Hay and Transact have either scrapped, reduced or amended charging models in the last month alone.
We are also yet to see how platform fees will shake out for Standard Life/Elevate (and for that matter Parmenion, if the merger between Standard Life and Aberdeen goes ahead), and the fate for charges under Aegon/ Cofunds. Interestingly, Aegon has not ruled out a flat fee model across the new combined platform, though it has to be said the statement we got from the provider on this front was non-committal at best.
So what is driving all this tweaking round the edges on platform charges? Some say this is more about opportunity than anything else, and that actually all this moving around of basis points and changing up of models does not amount to material client savings in the long run, particularly on typical portfolios.
Money Marketing has previously reported on the challenges platforms face in turning a profit, and the current environment suggests these issues are only going to become more pressing.
Replatforming projects may as well be funded by monopoly money, given some of the sums involved. There are also parallel issues with covering the myriad and variable operating costs a platform incurs, plus the need for adequate capital and the equally important requirement for robust financial backing in the event of redress claims. With that backdrop, it is no wonder that platforms are scrutinising the bottom line and revisiting well worn strategic arguments about fixed and percentage-based fees, and at what level of client wealth to apply certain discounts, if any.
But in this continuous bid to shore up business models, there is a risk that advisers and clients get left by the wayside. With no crystal ball to draw upon, advisers may choose their preferred platforms in good faith, with charges being one key factor they consider. Then a few years down the line, perhaps with more mergers in train, they find the reason why they chose that platform no longer exists. The process of switching clients in that event is then hindered by barriers such as charges for in specie transfers.
Chopping and changing platform fees is fine, but advisers need to understand the rationale and whether it is about helping clients or the underlying providers. Clear communication between platforms and advisers will be key.
Natalie Holt is editor of Money Marketing