In a world of platforms, how can advisers safely meet the requirement to choose the most suitable product for each client?Advisers want to deal through no more than one or two platforms but concerns over the concentration rule are leading some to spread business over a range of platforms. The key requirement is the FSA’s suitability rule which says an investment adviser must choose and recommend the packaged product which is the most suitable for each client. An IFA or whole of market adviser must carry out a reasonable analysis of a sufficiently large number of packaged products to underpin this choice. Criteria include assessment of the level and structure of charges, range and track record of investment funds, specific product features and service quality. The same product will often be a fair choice as the most suitable in each category for a wide range of clients but those with particular needs may need something different. These ideas are familiar to all adviser firms, as are the questionnaires which they send each year to the FSA. These questionnaires until recently required an explanation for product providers that accounted for more than 20 per cent of new business commission income but now those questions have gone. There is no such thing as a concentration rule or 20 per cent limit, just the suitability rule. So what is the problem? In FSA terms, a unit trust or Oeic is a packaged product, as is a life or pension policy. A platform or wrap is not. Its components are unit trusts or Oeics, which may be held directly or through an Isa or self-invested personal pension, and unit-linked life policies such as personal pensions or investment bonds. These components, excluding Isas, are packaged products in FSA terms on which advisers might assess suitability where relevant FSA suitability rules apply. When the FSA starts to regulate Sipps from April, it proposes to define them as packaged products and so bring them into the scope of the suitability rule. Sipps are essentially a set of client services surrounding a group of investments. So are fund platforms. It is perhaps surprising that the FSA treats the two differently when defining packaged products. The FSA’s thematic research into wraps picked up that some advisers are taking into account the suitability of a wrap service, including charges and benefits, when advising clients. The FSA regards this as good practice rather than a regulatory requirement, recognising that wraps are not defined as packaged products and that it has no plans to regulate them. But it could be overtaken by events. Mifid includes a best execution requirement that firms arranging transactions in financial instruments must take all reasonable steps to get the best possible result for their clients in terms of price, timing, settlement arrangements and other criteria. Firms must also establish and maintain an execution policy and explain to clients how they will seek to get the best results for them. This applies not only to buying stocks and shares but collective funds. Until recently, this would have been no big deal for collective funds. All trades were carried out through the fund manager, so demonstrating best execution could not be a real issue. Now each fund is likely to be available through a range of platforms as well as directly from the fund manager. The platform will generally offer benefits such as online valuations and switches, access to financial planning tools and so on. In some cases, transactions will take place at wholesale prices with additional client fees for use of the platform so overall costs will vary. It is hard to avoid the conclusion that without some fancy footwork by the FSA, best execution will lead to new requirements for intermediaries to explain and justify to each client whether or not they propose to use platforms and which one will give the best result. It seems the FSA concept of a packaged product in this context has outlived its usefulness. Assessing suitability must remain central to the role of an investment adviser. At each level – investment funds, wrappers and platforms – there will be varying levels of quality and price from different providers. Market analysis can identify a short list of choices at each level that will suit most clients but advisers must be alert to individual needs that do not fit in with the majority. Some clients will have requirements that call for a very different investment fund while for others there may be no good reason to put investments on a platform. There may be a trade-off between the number of platforms used, the range of funds available and the overall cost to the client but trade-offs have always been a part of giving advice. It should not be the job of the regulatory system to impede advisers who are trying to make those trade-offs in a responsible way. The FSA says IFAs who recommend wrap-based products must ensure they consider products from the whole market, even if they are not available on wraps. This does not imply a quota on the use of a particular platform or an arbitrary allocation of business to different platforms. That is not the FSA’s intention.