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Head to head: Should advisers or clients pay for platforms?

As Money Marketing explores new research on who benefits from platforms, two leading lights go head to head on the issue of who should pay: advisers, or clients?

Clients should pay

We view platforms as being just another product in the advice process, much like investments and tax wrappers. The upshot is that in practice we consider a selection of platforms from across the market and recommend whichever is most appropriate (if any) and cost effective for a given client. The key here is that we make each platform recommendation in our client’s best interests, not our own.

If advisers were to pay the platform fee rather than clients, this would jeopardise both independence and doing what is best for each client. I concede this is also a risk under the current system. For example, Money Marketing previously exposed Chase de Vere negotiating a discount with Cofunds which it effectively kept for itself rather than passing on to clients. In general, advisers having to justify to a client why they recommend a specific platform is a positive.

If advisers were to pay platform fees they will inevitably increase their own fees to reflect this. Some will probably use it as an excuse to boost their bottom line by charging more than the actual underlying cost, and I don’t think platforms should ever be a source of potential profit for advisers.

Advisers paying for platforms might encourage greater price competition, since more advisers will probably be willing to barter with platforms for themselves than their clients. Given platforms generally seem to be spending small fortunes on botched attempts to upgrade their IT I suspect they will resist any price reductions.

Justin Modray is director at Candid Financial Advice

Advisers should pay


So announces Aviva for Advisers: “A secure online platform that allows you to manage your clients’ investments.” Numerous ancillary services offer guidance on choosing an adviser platform “based on the practical reported experiences of hundreds of advisers”.

Platforms facilitate fee payments, regulatory guidance, model portfolio management, adviser events and so on. Adviser platforms’ – there’s a clue in the name – sales and marketing is aimed squarely at their clients: the adviser community.

Press reporting on re-platforming makes little if any mention of end investors, choosing to focus on “how advisers will be impacted”.

The party who pays for the service gets custody they do not need, and access to valuations platforms admit are not used. Indeed, customers are positively constrained as to what activity they’re allowed to perform on their own account. If they do want access, it’s at a weekend.

But often they can’t because that’s when maintenance is done, so as not to interrupt the service to advisers.

Advisers’ customers cannot choose their platform, and have no influence over price, therefore there is little motivation for competition. Advisers paying for platforms would be the catalyst for that competition, to the benefit of both client and adviser.

Graham Bentley is managing director of Gbi2



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. The client inevitably pays, either directly or indirectly, so the question isn’t hugely challenging.

    If a platform makes my business more efficient, the client benefits in terms of better service received and lower costs. If my clients’ assets are spread all over the place and my business is less efficient, who should pay for that inefficiency? Having to chase some inept provider or other for weeks on end – some think that’s perfectly normal! – has a cost and an efficient platform makes a huge difference.

    A platform is part of our back office. It isn’t a product and shouldn’t be treated as a product (something that neither the FCA nor many platforms really understand). Short term savings are great if they’re available efficiently, but they must be both scalable and costed in relation to the whole service on offer. The fact that the word ‘efficient’ crops up repeatedly is no coincidence. Are we a service industry, or product salespeople?

    • As I understand it, the FCA doesn’t regard platforms as Retail Investment Products yet, as far as WoM IFA’s are concerned, it demands the same degree of comparative due diligence (presumably on all those available) to determine which one is most suitable for each particular client. It also decrees that that process must be repeated periodically going forward, which is a ridiculously onerous, time-consuming and costly process. Apart from anything else, on just how many criteria beyond costs and the ranges of funds available are such comparisons supposed to be based? Until you actually use a particular platform, which means placing at least a few client portfolios on it, how can you know whether, in practice, it’s good, bad or indifferent? And then, should the one you initially recommend turn out to be a nightmare, you have to undertake the process all over again to identify the best alternative, go cap in hand to the client to explain why your original recommendation was a wrong turn and re-register everything to the platform that you’re now recommending instead. For all that, you certainly can’t charge the client.

      This is why more and more FA’s are choosing to restrict their offering to a handful of tried and trusted platforms though, anecdotally, a fair few do so anyway but still call themselves WoM IFA’s. It’s all a bit of a mess.

      That said, the benefits (to both clients and the FA) of using a (good) platform are so self-evident as hardly to be worth debating. But, like everything else an FA does for his clients, I see no logic in or justification for any party other than the client to pay.

      Apart from that, the discounts on the charges for most funds available via a platform eclipse the costs of the platform itself anyway and, even if they don’t do so completely, the small additional cost is well worth paying.

  2. Advisers meeting platform fees would inevitably skew the market, as it would militate against smaller firms without the necessary clout to influence pricing.
    Further, irrespective of clients being able to influence the choice of platforms (which in any event would have a minimal impact on outcomes), platforms directly lead to cost savings for clients as, without them, higher administrative and reporting costs would be passed on to them.

  3. Clients pay for an advisers time. A platform (typically) saves the time for the adviser (i.e. imagine holding a portfolio of funds and dealing direct with each fund manager).

    Therefore given that the adviser’s time is being paid for by the client and the perceived wisdom is that platforms are a ‘time cost’ effective way to invest a clients money, clients are saving money by paying for a platform.

    If the adviser pays for the platform then I would expect the cost of advice to rise and the net result being a higher total cost of investing – the loser therefore being the client.

    A bit like we found with the full unbundling of fund charges, we have to be careful not to do things in the clients best interest which, for many, makes things more complicated and costly.

    We absorbed that time cost, but there will come a point where enough is enough.

    One final point – we’d love to use a more cost effective approach for our clients – after all, that’s who we work for.

  4. I think that advisers mpaying has some validity. However isn’t then a logical step for advisers to pay fort the fund management charges too? Then the whole cost of a portfolio could be ytrasparent.

    However I posted on another site (Platform Data collection):

    “I don’t understand why a platform valuation can’t have an extra column next to each fund valuation stating the management cost in £ terms. The bottom line could then have the total for the portfolio with the platform cost stated below that with a space for a separate itemisation of the adviser fee so that the whole cost is clearly evident to the customer. Is that rocket science?”

    In this way costs would be just as transparent and perhaps the status quo could be retained and this debate would then perhaps be somewhat redundant.

  5. OK, so leaving aside who pays for platforms, who pays for the advice? Well obviously the client does.

    If we go back 20 years or so to pre-platform days and forget about sales based commission, to try and create and manage a diverse portfolio as we now do, using old tech, and information direct from providers would be so time consuming and difficult as to be prohibitively expensive for the client who would have to pay for it.

    Used properly the platform makes life easier, more precise and efficient and therefore the cost to clients is lower and they are benefiting from the planners skills and qualifications in the relevant area rather than paying for staff hanging on the phones or chasing never replied to e-mails (or faxes in some cases as in 2017 e-mail isn’t viewed as secure)

    Investment costs are generally cheaper using a proper platform even though there are platform fees and access can be gained to funds hitherto the preserve of institutional investors.

    If the planner pays for the platform, it’s just another cost to the firm so will add to the client fee in one way but still make it more efficient in others.

    Overall I’m not convinced that this is a valid debate, any business incurs costs which ultimately are passed on to consumers. If MP’s didn’t have a fantastic pension scheme, parliament would be cheaper and thus taxes lower. Why not have MPs fund their own pension schemes rather than us etc?

  6. Prestwood/Truth is our back office and we choose that. We reccomend specific platforms (or not) to individual consumers. For some a WRAP isn’t right, but most of our clients tend to haev similar needs so most end up having the same platform reccomended to them although we usually have about 3 different platforms at any given time we will consider for different client profiles/market segments.
    I don’t relaly mind whether we pay for it (and the client then indirectly) or the client pays for it directly as is the case now. an efficeint WRAP does however save masses of wasted time with Dinoseur life companies who have one size fit all rules which they often don’t understand themselves, such as asking for a death certificate of a Trustee of a maturing savings plan when an original grant of probate ahs been provided which confirms treh individual is dead, but doesn’t state what they died of. Then dinoseur life writes to the 82 year old whose wife dies 2 years earlier and keeps doing so despite being waredn off about vulnerable clients. WRAP platforms tend to use common sense and THINK about what they are asking for and why and if they don’t know they allwo advsiers to speak to their compliance teams, Dinoseurs don’t

  7. Am I right to assume that this ‘fee’ is levied only when a platform solution is used, or Are you proposing some form of annual levy on an advisory firm per platform? Because that won’t work for starters, even with one platform never mind the plethora of hosts available.

    If the ‘fee’ is levied only at the time when a platform solution is used, then it is a moot point as to how it is paid for, as the Client will obviously pay either way!

    Is this some sort of silly distraction to avoid the real elephant in the room? The one that should be getting all of the regulators attention; that is the promotion of unregulated investments via regulated advice firms (independent AND restricted)? Talk about fiddling while Rome burns!

  8. I’ve been thinking about this a bit more.
    Ignoring advisers new to the industry or those who have changed firms recently with no client bank. Let’s assume we look at the average one adviser firm instead.
    Lets say they use a back office system such as IRESS or Prestwood. How much does that cost each adviser and how much are they willing to pay?
    My back office system costs about £6k per annum and I am happy to pay that. It wouldn’t go up much more if we had two more RIs whichw e will; have soon(still under £10k)
    Let’s say the average RI has between £10 and £20 million of AUM (I don’t know what the average is)
    The mean platform charge works out at about 0.3% of FUM I think, so that’s between £30 and £60k per annum clients are paying to platform/wraps for a combination of custody/acting as nominee and buying and selling etc.
    Do advisers value their back office systems more than the WRAP provider or vice versa at nearly 10 x their back office system cost???? or do they view it of broadly similar value to an adviser (and in turn therefore their client) and were we writing the cheque, would we pay 5 let alone 10 x?
    I have a sneaky feeling that if advisers were paying the platform/wrap fee directly that the say £60k going to a platform based on a £20 mill AUM would be negotiated down significantly to the benefit of consumers. It would then be for the firm to decide whether to charge a flat fee a minimum or whatever to their clients and justify that TOO their clients while explaining their logic to the FCA.

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