New research reveals an interesting change in advisers’ top criteria.
Advisers are becoming a lot more price sensitive when it comes to choosing platforms, according to recent research. One might also guess this is extending into other areas. Some important changes are taking place under the surface.
Earlier this month, as part of a survey for its new UK Adviser Platform Guide, Platforum asked advisers what their five “musts” of the perfect platform are.
Platforum has been tracking this theme for some time. The same question was asked last March and at intervals between, so it is possible to observe how the trends have developed. The findings look pretty robust (see chart).
Low charges turn out to be the single most important factor for 22 per cent of advisers. That is seven percentage points ahead of the next most important single factor, which is usability. After that comes the financial stability of the platform, and only then service, which comes just ahead of investment choice and functionality.
If you lump together the top five factors advisers focus on in selecting their perfect platform, low charges also comes out top. A high 70 per cent of advisers put the criteria in the top five must haves. Investment choice is next at nine percentage points less, followed by service, with just 52 per cent putting this is in their top five must haves.
So why is that news? After all, advisers have been seeking out good value for money for their clients for years. It is what they do.
The answer is that the situation has switched round in the last year. What is more, two intervening surveys show the change taking place incrementally over the course of the last 12 months.
Indeed, in March 2017, the top must have was service, as measured by the number of inclusions in the top five factors, with 67 per cent of the advisers surveyed putting it there. Only 60 per cent of advisers placed low charges in the top five factors a year ago. It would seem advisers are becoming more charges-conscious.
Obviously, that is not true of all of them. There remain a remarkable 30 per cent that do not place low charges in the top five factors at all. For them, investment choice, service, usability, functionality and tax wrapper choice trump charges.
This is, of course, a significant proportion and shows there could still be a decent living to be made by some reassuringly expensive platforms. But if the trend continues and perhaps even accelerates, the prospects for such platforms could start to look less reassuring.
And the trend towards seeking lower charges does seem to be gathering pace.
One point to ponder is that Mifid ll charges disclosure has only just started to kick in. As the year goes on, adviser and client focus on overall charges is bound to increase.
One can overemphasise the likely impact of this development but it seems certain to have some effect. Advisers will not want to cut their charges, at least until they have seen how they can reduce clients’ costs in other areas, which will mean looking at the charges of fund managers, DFMs and, of course, platforms.
It is true that advisers have been generally reluctant to switch clients from one platform to another on the basis of price. Many say the cost and effort has typically still been too high in relation to the savings for clients.
But that could be changing: platform charges are dropping, opening up real pricing differentials. At the same time, advisers need to be able to justify their ever more salient fees and transfers between platforms are possibly getting easier (at least one would like to think so).
Reassuringly expensive platforms and other providers should watch out. The times they are a’changing.
Danby Bloch is chairman of Helm Godfrey and consultant at Platforum