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Platform truths, half-truths and down-right misconceptions

Lee RobertsonAt a recent lunch with both the head and commercial proposition director at one of the platforms we use, we somehow ended up on the topic of truths, half-truths and misconceptions we had heard about platforms over the years.

I personally do not think there has been a single innovation that has brought as much clarity and benefit to private clients as platforms, but they still seem to be massively misunderstood by so many.

The following list is a quick, back-of-a-napkin run through of our favourites.

“Platforms only add cost”: No, they add real value too. Investment execution is cheaper using platforms (remember the old days of 1.5 per cent per annum and 5 per cent initial charges?).

“Platforms should be paid for by advisers as clients do not benefit”: In a fee-based world without platforms we would be back to clients having to pay for the poor administration so prevalent in the old days. All the time and money saved using a platform is saved for the client. Platforms drove up reporting and response standards sector-wide, as other organisations had to improve to compete.

“Clients access platforms as much as advisers, so why do they need advice?” Platforms provide reporting and a lot of other functionality but very few wish to offer any form of advice unless they are in the D2C space.

“There are no product or wrapper benefits for clients”: Platforms have reduced or removed many wrapper charges, making them much more affordable. Remember how expensive Sipps used to be?

“RDR reduced fund management charges”: This is one of my favourites. It was actually the advent of platforms in 2000 that halved annual management charges and removed initial charges.

“There is a clear division between advised platforms and D2C platforms”: Again, not true. Many clients on “advised” platforms also self-manage some of their assets on the same offering.

“Pre-RDR, advisers kept the discounts they negotiated with fund groups”: It is possible some did but this was pretty rare. The discounts were passed at fund and platform level directly to the client.

“Platforms influence advisers on which funds to purchase”: More nonsense. Platforms we use have never approached us with fund recommendations.

“Platforms just want to take fees from clients and do little to improve standards”: Another point I disagree with. Platforms are in continual dialogue with advisers and fund groups seeking to improve their propositions. Some – with Nucleus a prime example – offer excellent content to help advisers learn and shape their businesses, which is all to the benefit of the client.

This list was not meant to be exhaustive. You may disagree and I would be the first to say that platforms are still far from perfect. However, I have been around long enough to remember how it used to be: the pricing; the wait for information (which, when it turned up, was often incorrect or incomplete); turnaround times that were measured in weeks not days.

The benefits of platforms to clients should not be forgotten: savings, increased engagement with advisers and virtually real-time reporting standards. Long may this openness and transparency continue.

Lee Robertson is chief executive of Investment Quorum



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Very nicely put. Too many didn’t understand how much more efficient platforms would make us since they came into being and just how much they have helped bring down fund manager charges; few advisers had the purchasing power to negotiate the discounts that the platforms achieved. We do need the FCA to grasp that a platform is an important back-office support function though (ultimately for the clients’ benefit as it keeps their costs down) and not a product.

    • Thanks for taking the time to read and respond Martin. Lots of work still to do by us all on this important element of client proposition but glad that the article chimed with you. All the best, Lee

  2. @Lee “remember the old days” These are still with us if as a retail investor you buy direct from the fund houses.

    Apologies in advance to Invesco Perpetual but following taken from website for one particular fund:

    “Entry charge

    The entry charge for the fund is up to 5%. This is the maximum that might be taken out of your money before it is invested. For example, if you invest £1,000, an entry charge of 5% means £950 of your money will be used to buy shares in the fund.

    The entry charge covers the costs of setting up your investment.

    If you invest through a third party (such as a financial adviser), but do not receive financial advice on your investment, this charge may include payments to that third party. For more details see “What share classes are available for your ICVC funds?”.

    Exit charge

    There is no exit charge for the fund.”

    Platforms help to reduce the cost of investment – there are few, if any, IFAs that will charge up to 5% for access to a fund. And how many platforms charge an initial fee for access?

  3. All good points well made Kevin which continue to highlight the benefits of advice and platforms.

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