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Platforms fear advisers don’t have portfolio permissions

The platform industry has raised concerns over some advisers using model portfolios through platforms without the correct regulatory permissions or a contract between the client and the discretionary fund manager.

In April, the FSA published guidance consultation on assessing suitability for replacement business and centralised investment propositions. The regulator says it found evidence that some firms that do not hold permissions to manage client investments are failing to arrange for clients to have a contractual relationship with a DFM.

Raymond James Investment Services head of business development David Hazelton says platforms should be required to check that the correct processes have been followed.

He says: “There are platforms that will operate a mandate from an adviser to make changes to clients’ portfolios without checking whether the adviser has the correct permissions or the client has an agreement with a DFM. It is concerning and needs to change.”

The Lang Cat principal Mark Polson says: “Even though there is no requirement for platforms to ensure the correct processes have been followed, many check anyway because of the risk of reputational damage if there is any detriment.”

Polson says platforms may look to offer standardised contracts for advisers who want to move their clients from one DFM to another.

When a contractual arrangement exists between a client and a discretionary manager, advisers must have written permission from the client to move them to a new DFM.

Avalon Investment managing director Harry Kerr says: “I think standardised agreements supplied by the platform would be an excellent idea and something we would look at.

“Bigger networks have such agreements in place for bulk transfers so there is no reason why platforms could not provide this service.”

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