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Natural selection

Dear PAT, what is the key to choosing a platform in light of the RDR?

Summer is here, making me realise there are just seven months to go until implementation of the RDR. Advisers are telling me they are wondering if they have done enough to be ready, are panicking because they have not started yet or are simply waiting to see what the FSA will do next.

In April, I told you I had been out talking about platform due diligence in a series of roadshows. I gave my opinion about what is needed, how I look at platform selection and what you need to do to satisfy the FSA.

It is apparent from the number of emails I have received that advisers are confused about what is deemed important selection criteria. This is not a five-minute job and will take some thought.

Platform reviews
One adviser firm told me it has been using Platform X for two years and is happy with it. It has some legacy business with a supermarket and no formal client service proposition after the RDR and it needs to justify continuation of Platform X. This is worrying but I talk to many advisers in this position. Do not put it off any longer, it is time to start putting pen to paper.

Another adviser told me platform selection is just part of its overall business planning for the next five years. Considerations include outsourcing to DFMs, portfolio modelling tools, segmenting the client bank, service propositions and back-office integrations. All in all, long days, numerous meetings and a lot of paperwork.

As part of the platform review process, it is important to look back at your experiences of using platforms and benchmark the value. Has the platform delivered what you expected it to? What do your clients think? Was it easy to use or did you experience any problems?

Client service propositions
I am told that advisers are spending a lot of time managing the transition to advisercharging and that those expected difficult conversations with clients have not been so difficult after all. An all too familiar story is a firm with considerable trail commission tightening up and refining the added value of platform adoption in its overall measure and justification for an ongoing charge to the client.

“That is where platforms come into their own,” said one IFA. Automated valuations, bulk rebalancing and the obvious benefits of integration with back-office and pointofsale technology make life more efficient.

“We simply could not provide an ongoing service to some clients if this was tailored to each individual’s requirements. Setting out our client service proposition made it clear what they get for the price.”

The FSA says firms should not pass on additional costs to their clients for services that are not directly valued by the client. We all know platforms are an administrative bit of kit but they do add value. It is vital to recognise and demonstrate the benefits and at the same time ensure suitability for clients individually, being clear about an alternative solution if necessary.

What is bugging you at the moment? Is it FSA uncertainty, finding the time to cross the i’s and dot the t’s or the daunting prospect of a total business upheaval for staff and clients? Let me know if you have any pressing concerns for next month’s issue and I will try to answer as many worries as I can.

pat@theplatforum.com

PAT is Platforum’s platform analysis tool. ’Dear PAT’ will share advisers’ most pressing concerns with platforms.

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