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Run-up to RDR hindering platform growth

The lead-up to the RDR could be hindering the short-term growth of the platform market, according to platform consultancy group The Platforum.

Figures collated from its quarterly (plat)Form Guide, for the last quarter of 2010, show 77 per cent, £10.16bn, of new business was still being written off platform with 5,394 advisers not using platforms during that period.

The Platforum says this may be down to advisers placing funds in a commission-based environment for as long as possible until RDR is implemented.

It says £2.99bn of new business was put on platforms by IFAs in the fourth quarter of 2010, amounting to 23per cent of the IFA market, up from £2.76bn in the previous quarter.

The total amount of business placed on platforms was down from £10.27bn in Q3 to £10.16bn.

The Platforum managing director Holly Mackay (pictured) says: “We think that this muted uptake of platforms is to some degree inevitable until commission is finally banned under the RDR.”

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  1. The muted uptake is due to the fact that many advisers are thinking again and thinking carefully about where to place their business such that they can run a profitable advisory pratice post RDR.

    Choosing unwisely will result in having to move providers which will in future largely be at the advisers expense – no allocation rates to cover up the switch and no commission from the new provider – so picking the right provider is key to avoiding potentially significant opportunity costs within the IFA firm.

    So the debate is not platform or not platform – the issue is whether the selcted provider is:
    Profitable and sustainably so.
    Committed to the UK market.
    Committed to a robust poicy on client ownership and orphan definition.
    Financially sound.

    That plus the fact that the FSA are casuing many changes needing to be implemented which the platforms are not used to.

    So think carefully – there are some great providers out there but they may not be the ones who come promising the earth with greenfield IT plays.

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