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Sesame boss: Era where clients pay for platforms could end

John-Cowan-700.jpgSesame Bankhall executive chairman John Cowan has questioned whether clients will be happy paying for platforms as more light is shone on the sector.

The industry veteran notes that the FCA’s recent platform market study poses a number of tough questions for platforms over whether they offer investors value for money and whether any competition that there is between platforms benefits clients.

This has fuelled further debate on who should be paying for platforms, the client or the adviser, Cowan says, suggesting that clients will be reluctant to pay platform fees when they have a greater understanding of the market.

Cowan says: “What adviser says to the customer: would you like to go on Transact or Nucleus? It’s like saying: would you like the lights on or off? It does benefit the client but really if it’s for the business it seems like a utility.

“The advisers have got to get paid for their advice. Whether the client pays for all the other things like platforms we will see.

Head to head: Should advisers or clients pay for platforms?

“They are paying for the advice, and we should be proud of that because advisers do a great job. But that obfuscated with some of those other things…Transparency has got to be there. To the degree of coming out and saying we have always been paid for this, it seems to me people reassess things.”

Commentators including Money Marketing columnist Graham Bentley have argued that there is now a case for advisers to field platform charges. However, other leading figures in the platform space like Zurich’s Alistair Wilson have argued that clients would be worse off if advisers paid platform fees, claiming that planners would have to add this to their advice fees, turning more people away from advice.

Cowan also questions whether percentage-based charging models more generally will stand up to increased scrutiny.

He says: “We might look back on ad valorum and say that was a lovely time.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Should advisers also start paying for the cost of providers providing fund factsheets, the KIDs, the provider’s postage when they write to clients, the providers energy bill?

    We already do much of the admin that was historically dealt with by providers and also have the cost (where applicable) of paper based transactions whilst also (generally) seeing service standards reduce. As a client of platform providers, I’m not all that chuffed to be fair!

    There has been a significant shift of time cost from provider to adviser but I’ve not really seen the cost of the investment ‘product’ reduce significantly for the consumer…. it therefore feels like we either absorb the cost OR pass it to the investor.

    As far as I’m concerned, increased transparency has not reduced costs to invest but has significantly increased to costs on those involved in the process.

    Ultimately, the consumer pays …. one way or another.

  2. So this is a large organisation with a business model that consists of providing commodity services suggesting that platforms should not provide the commodity billing service for their’s and adviser’s fees, and instead advisers should do it – as then small directly regulated firms have a greater incentive to work with large organisations which provide commoditised billing services.

    Who knew?

  3. “The advisers have got to get paid for their advice. Whether the client pays for all the other things like platforms we will see.”

    Well, that depends on whether platforms add value to the chain or not and given Mr Cowan’s advisers are using them it suggests they are.

    If Mr Cowan thinks advisers can provide the same services without a platform for less cost why isn’t he doing it already?

    Perhaps this is deflection and the truth of the matter is that platforms are, pound for pound, better value than advisers? The difference, of course, is that advisers control the client.

    The FCA’s platform study is essentially a competition review so it will be interesting indeed to see the output. I would wager there is more effective competition in the platform space than there is in the adviser space…

  4. There are a lot of simialrities between back office systems which advisers use and Platforms.
    my back office system, which is essential for me costs 1/10th of what my clients have to pay for their platform.

    • If I was requried to pay 10 x what I pay my back office system to use a Platform, I would be looking for a less expensive version.
      There is however little difference in cost between one platform and another in the fund size range moct of my clients are in, so the decision as to which platform to use is driven by their efficiency rather than price at the moment.

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