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