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The selection process

Aifa has recently launched its ’Platforms and your business: The decision-making process’ guidance for advisers looking at platform solutions. Here, a group of leading practitioners and providers debate the prevailing issues on platform selection

Round table participants

Duncan Muir
development manager, Standard Life
Dawn Mealing
head of investment proposition, Bluefin Wealth Management
Sophie Fiori
marketing director, Aifa
Ian Howe
managing director, Baigre Davies

What is a platform supposed to do?
It should facilitate the process of giving advice. It should be a piece of IT kit that assists the relationship between adviser and client. It should increase the clients’ ownership of personal financial planning and it should make the process of giving advice and maintaining an ongoing relationship with clients easier.

DMu: Platform is an enabler to deliver an advice process. It should also be able to transform the business to make it more efficient.

Muir: ’Platform is an enabler to deliver an advice process’

Do you support client involvement in platforms?
We actively encourage it. It is a very important aspect of how this technology can be used to really get the clients as involved in their own planning as can be. The more engaged they are, the better the relationship. It is very important never to lose sight of wrap and technology is to benefit the client first. The firm and all the issues of process and transparency must be second.

DMe: For the mass-affluent-type client, it is principally a way to keep all their assets together and how far an advisory firm engages depends on their profitability, their proposition and issues of operational effectiveness. For wealth management clients and higher-net-worth, a wrap becomes more of an enabler to allow you to provide those clients with enhanced services such as tax management, a more comprehensive investment programme, which a bundled platform may not offer.

SF: The important thing is to examine the nature of the client. The issue of client segmentation is at the heart of the platform selection. Without the client segmentation, it is difficult to define the benefits.

Can everyone benefit?
There are some clients for whom it is less relevant. Perhaps clients with very simple needs may be best served by some kind of technology that allows for consistent implementation of what they need. It comes back to what does that client look like. But I do believe that whether a client has £5 or £5m, some form of technology with which the client can interact can only be a good thing in this age.

IH: To suggest that for a firm to be RDR ready they must use a wrap is not necessarily true. It depends on each individual firm. The starting point should be whether it is appropriate to go down this route. We need to be careful not to assume this is the way forward for everyone.

Fiori: ’It is about setting individual targets’

SF: You would certainly look at all your clients on a case by case basis on an individual business basis and a client by client basis, it is not a one-size fits all.

If you are an advisory business, starting from scratch, what sort of questions should you be asking?
The first question is who is your client and what is your proposition to that client. Some people want to be all things to all people, others want to be very focused. What is the aspect of platform technology that facilitates their experience better? The second step is which platform will facilitate that best.
Also, what is often overlooked is platform financial stability. Could capital adequacy and solvency II issues apply to platform businesses, for example?

SF: This is particularly important if you consider the amount of time that goes into implementing a platform. It’s a costly and time-consuming process.

DMu: It is all about what you are trying to achieve with your business – are you looking for an exit strategy? Do you want to acquire other firms? Which clients are profitable?

IH: It is important that the firm does not lose sight of the fact that a platform is an IT piece of kit. For it to be the focal point is wrong, in my mind. If we are asking the regulator not to treat wraps as products, then we treat it as a product, we are asking for problems. It is simply a part of the jigsaw.

DMe: I think this is where the conundrum for advisers and regulators lies. Yes, it should be seen as an IT system but there is all this noise surrounding “product”. Certain platforms have certain providers underneath them. It is where the regulators are stuck. Is it the product? Is it IT? It’s a bit of both.

In practice, how much do platforms differ?
There is quite a difference. The technology is there to deliver a robust advice process and help mitigate against risk. The access to certain tools and investments is different.

SF: Platforms are competing on their offering, their price, their service and there are people offering comparison tools. It is about setting individual targets and criteria and seeing whether the platforms meet those criteria.

DMu: There is also difference around support. Some provi-ders just offer a “platform in a box”. Others offer a way to develop the business practices to sustain a platform.

Are comparison tools helpful?
They help people to an extent. They are a bit one-size-fits-all. It does not take into account client segmentation, for example. It is nice to have comparisons but it does not help you determine whether this is the right tool for the client. I would say they are a good start for businesses that do not have significant resources.

IH: The due diligence piece is really important. These can help to crunch numbers and look at charges but you are entering into a partnership with the platform provider so it’s about people and the cultural fit. I don’t think you can get that from a comparison site.

DMe: There is also the question of existing IT processes and back-office systems. Some advice firms may already have these in place and these comparative tools don’t get to the nub of how integrated they can be. Commission/fee reconciliation, client data matching – you don’t get to that without employing someone to do IT due diligence and often that can be what makes the platform work for you or not.

Mealing: ’Expecting wrap to provide complete operational efficency is not right’

A lot of advisers have implemented a platform thinking that it is going to do great things for them and in fact it all falls over because nothing talks to each other and it turns out to be the worst thing they could have done for their business. There is a lot of talk about platform suitability for clients but if it doesn’t work for the IFA in improving operational effectiveness, then it won’t be suitable for the client either.

Where firms have successfully integrated wraps into their business, what have they tended to do?
A lot of it is around a clear business goal, a well-defined service proposition, effective planning from an asset transfer point of view but also process improvement. Roles and responsibilities are ano-ther important area. Where we find clients are taking longer to embrace the platform, it is usually where one of those aspects has been missed.

IH: That approach certainly helped our firm. There were the regulatory drivers but we saw that this would enable us to do things better for clients. We set up a small project team who were the “wrap implementation team” comprising technology specialists and members of the management team. That process took four months of planning before our wrap went live. After that, it was another six or seven weeks before the first client went live.

How much do businesses have to change to accommodate a platform?
Technology should not drive the change. The firms we have seen have most problems have tried to implement a piece of technology and then bolt all the bits around it. They’ve had to revisit the way they manage the clients and the business and it can be terribly disruptive.

IH: It is a case of looking at the way your business runs and then deciding, from a systems perspective, where you want to be. That might involve wrap or not. It may involve using your back office or changing how paraplanners work.

Have you found that clients want to be involved?
It depends on the client. In our experience, once a client has their logon and ID, if they get into it, they become very engaged. Others you can push as much as you like but if they don’t have a PC at home, there is only so far you can go. But we found with those who became engaged, it generated lots of questions.
DMu: Advisers have often under-estimated how much demand and queries these things create. It needs to be managed.

DMe: You want transparency, you want clients to see what they’ve got and to go in and look around. Even to the extent of having a pot of “play money”. It can be helpful in at least seeing more of their assets even if you are not managing them. If, on the other hand, they are going in every day and stressing that they are up or down a few per cent, then it’s how you sell the idea of what this enables them to do.

To what extent is the legacy issue still a problem?
It is a big challenge for the industry to be able to support that. Some companies are providing a price comparison service for legacy assets, which links to the back-office system of providers. There is a lot of work needs to be done. Origo is working on a legacy system, for example, but I think it’s in the very early stages.

IH: Having to report manually for legacy business does dilute the effectiveness of a wrap. I hear that there may be a “master wrap” or “wrap of wraps” that would address these issues. If you could use the technology in the planning process more effectively, X-raying assets in the fund, then that would make life a lot easier. That said, providers have a real fear of loss of assets and a lot are still shackled by exit penalties or tax issues, so they are not necessarily that easy to move anyway.

Howe: ’Decide from a systems perspective where you want to be’

Once you have implemented your platform, how do you judge its efficiency?
One of the most obvious areas for us was the amount of time our back-office and paraplanning teams were spending preparing for annual reviews. Because we record time, we were able to see and compare how much time the review was taking preand post-wrap. It improved dramatically. Our average profitability per client is increasing. We also have fewer advisers responsible for more revenues.

DMe: If you have not improved your client experience or delivered operational efficiency, then what’s the point? Expecting wrap to come in and provide complete operational efficiency is not right. It makes some things a lot better but some things a lot worse.

IH: It is also very important that our back-office team developed a good relationship with the people in the back-office team at the wrap provider. When there are issues, we can work together. It’s a concept of partnership. Wrap providers engage with us as service providers.

Is there anything that platforms still have to do?
They need greater transparency about what is underneath. STP with no paper on the provider’s desk is very different to piles of orders that need to be executed. People have not appreciated those platform operational issues and often just see the front end. Pricing – in particular the deals platforms have with underlying investment houses – is still not completely clear.

IH: The big issue is disclosure of information between businesses. We want to see simplicity and transparency of pricing. As it stands, the charging structures can be very complex. IFAs are now required to have complete transparency of charges and it is difficult to then work with a wrap provider that does not also have complete transparency of charges.


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