With a plethora of investment classes, tools and tax wrappers available, advisers are faced with an abundance of functions depending on the platforms used by their firm.
But how much of this functionality is actually considered crucial by advisers?
Platforum recently collated data from 20 adviser platforms on functionality presented through league tables looking at investment choice, tax wrapper choice, adviser functionality, client functionality and available tools.
The results, as expected, were considerably varied, with each platform offering a different number and range of functions. All the league tables are published on the Money Marketing website.
But what do advisers really want from their platform? Is having an extensive range of investments at their fingertips a necessity? Or is efficient platform service still more important than having access to the latest tools?
Investment choice unpicked
The league table for investment choice included 19 different asset types, highlighting those that are commonly offered across the majority of platforms and those that few platforms offer. No platform offered all 19 investment types but some, for example, 7IM, AJ Bell, James Hay, Raymond James and Transact, offered 15 or more. Some of the least offered investments were unlisted securities, property authorised investment funds, hedge funds and multi-currency share classes.
Some platforms, for example, Aegon and Old Mutual Wealth, have signalled they will be making more investments available through their technology upgrade and replatforming projects. Cofunds users will be able to offer their clients access to ETFs once they have moved onto the new Aegon platform and Old Mutual Wealth is also adding ETFs to its platform.
The league tables also show platforms can offer up to 15 tax wrappers, with all offering pensions income drawdown options but just one advised platform – Transact – offering the Lifetime Isa.
Thameside Financial Planning director Tom Kean predominantly uses the Elevate platform and says investment choice and flexibility is one of the key reasons he does so.
Kean says: “We like all the whistles and bells because we do not run model portfolios. We have got core holdings we go back to all the time but we like to go off piste and look at more interesting funds if it is right for that client.”
He adds: “We love the ability to have thousands of funds to choose from. With Elevate, even if it is not on there, if you present a good enough case, they will get it on there for you.”
Certified financial planner
This is a tough one for platforms. All adviser businesses are different and are dealing with different types of clients offering different services and delivering different things to different client segments. The platforms are trying to cater for all. The challenge is that each platform is trying to win new adviser businesses to work with, most advisers have been working with a platform for a period of time, and they are trying to be able to fit in with all new and existing business using platforms. We are happy with the platforms we use. Would we use others because of the additional features they offer? Maybe; whether those features would bring more benefit to our clients is a question we have to keep asking ourselves.
While platforms being responsive in adding new funds or functions is a positive for advisers, Altus senior consultant Ben Hammond says platforms need to be careful that what they are adding will be truly useful to users of the platform.
Hammond says: “The platform needs to be careful they do not just make a quick reaction. For example, Aegon has engaged its adviser community to say these are the improvements we will give you, we will be making sure there is the best of both worlds in terms of tools when the [Aegon and Cofunds] platforms are brought together. [It is about] being clever about going and speaking to the adviser community, finding out what they and their clients want and then developing the right tools.”
Candid Financial Advice director Justin Modray says having a reasonable range of tax wrappers and investment options on platforms is commonplace but what is often missing is the ability to pre-fund new contributions and fund switches. Modray calls these functionalities “invaluable”.
The league tables show just 11 platforms offer pre-funding of pension tax relief at source and 16 platforms allow advisers to pre-fund investment trades and switches.
Modray says: “Who wants to wait a week or more to credit monies to a client’s account or switch funds? Such delays can cost clients dearly from being out of the market so I’d like to see this facility as standard on far more platforms.”
Richmond Wealth senior partner Chris Bryans says a platform doing basic tools well is the most important thing and does not find he uses a lot of the enhanced functionality. He says: “Investing money quickly when it’s received, flexibility in income payments, model portfolios, low cost share classes, and pre-funding tax relief are the type of things that make a difference to clients. [Other functions, such as] investment research and risk tolerance questionnaires don’t really help as we need these for non-platform clients as well, so we need to source these independently anyway.”
Conversely, Kean says because most of the firm’s business goes on to a single platform, more of the enhanced functionality is used. He says that is the benefit of predominantly using just one platform; becoming familiar with the tools and getting the most out of what the platform offers.
He says: “Because most of our business goes on to a platform, the functionality is used more and more so you do start to dig down and learn the features. We gravitate towards Elevate and because we use it a lot you then do start to look at more functionality.”
The league tables also set out the financial planning tools offered by each platform, however, advisers speaking to Money Marketing say the quality of these tools is variable.
Modray highlights capital gains tax reporting as an “Achilles’ heel” for many platforms. The league tables show most platforms offer this tool except ATS and James Hay.
Modray says: “Ideally there should be a tool to calculate gains or, at the very least, information for accumulation fund versions so advisers can make the calculation.”
Due diligence imperative
Platform due diligence on the tools offered is also crucial when advisers are determining what platform to use and considering what they want from a platform.
Hammond says advisers need to be aware of conflicts of interest when carrying out due diligence and check if tools are provided through third parties.
He says: “Platforms can partner with a third-party technology firm on tools [to help prevent conflicts of interest]. If that explanation is there and the adviser is confident it will provide for their clients and there is no conflict of interest, then they should go ahead and use it.”
Hammond adds: “The platforms should never be pushing something that is their own but with all these tools the adviser needs to make sure they will be of use to them because it comes back to value for money for the client.
“If they are paying an extra 5bps for something that never gets used it is probably [not the right thing]. Even if it does get used it is coming back to what the platform provides and making sure it is completely independent.”
Cervello Financial Planning director Chris Daems focuses on the functions his practice needs when carrying out platform due diligence.
He says: “These tend to be the robustness of the technology, the level of support, cost, a decent choice of products and investment options. It’s rare we’d select a platform due to its tools or reporting functionality as we feel that independent research tools and our back-office system manages these processes far better than the actual platform technology, and allows us to maintain our independence from the platform itself.”
Service still king
While the tools and investment choice offered by platforms are key considerations for advisers, efficient service and promptly resolving issues remains an important factor in overall adviser satisfaction with the platforms they use.
Modray says: “Most platforms we deal with still struggle to consistently deliver this very simple requirement, and should perhaps put more effort into trying to recruit and train capable support staff than wasting millions of pounds on failing IT upgrades.”
He adds that even those platforms that do offer an efficient service can be let down by other usability features, for example, their website.
Modray adds: “Platforms should focus on presenting information clearly and making transactions straightforward. I don’t want to spend ages jumping through hoops just to place an investment deal or run an illustration.”
Bryans also highlights service issues, including the much-publicised problems at ATS, and acknowledges that a need to focus on costs can lead to standards declining.
He says: “For platforms this can be a challenge as they want to keep costs down. If we’re constantly having to chase providers this means more resources and where this persists we have to change providers or alternatively increase costs for clients.”
Bryans adds: “Service issues with platforms cause us the greatest amount of angst. Platforms are meant to help advisers by reducing the time we need to spend on transactions, which translates into lower initial and ongoing costs – yet poor service with platforms leads to much more work than if we had used a provider.”
Expert view: Andrew Ashwood, analyst, Platforum
In our latest research with advisers we found that 50 per cent rank good functionality as a top five must-have for the perfect platform; only low charges, investment choice and service were more widely cited.
While not always the deciding factor, the levels of functionality available on platforms is evidently important for advisers when choosing one.
The consensus from our research is that platforms should home in on the core functionality that both advisers and paraplanners are using in their day-to-day activities. Platforms need to focus on getting these basics right before focusing on the additional nice-to-have tools and features.
More often than not, advisers prefer to use third-party tool providers so platforms may be better suited to integrate with these providers, unless the platform is confident it has a market-leading tool.
We have seen first-hand how efficiencies can be created in adviser processes when testing adviser platforms. Areas to address include improving model portfolio functionality and facilitating e-signatures to reduce the amount of paperwork or doing away with signatures altogether.
Managing clients in decumulation is another focus area and advisers have been more vocal about the support they expect to receive from platforms in paying income and supporting sustainable withdrawal strategies. Advisers feel that platforms could and should do better.
The good news is that platforms are increasingly picking up on their users’ frustrations and many are hosting user groups to better understand adviser priorities. The number of platforms currently going through the pain of technology upgrades shows there is widespread recognition that good functionality is critical to their future health.