Sesame 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.
“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.”