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Challenging the status quo bias on platform selection

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Advisers did not naturally gravitate towards platforms when they first came out. Letting go of paper was harder then than it is today. In fact, they only began to grow in popularity when they became the main way for clients to purchase straightforward savings products such as Isas.

While platforms have since become the out and out first choice for advisers – with more than 90 per cent of new Isa funds invested via them – the fact remains, for many, their use came about by accident rather than intention or desire.

As a result, selecting which platform to use did not always receive the proper focus it should. And while selection processes are now more rigorous, the FCA clearly thinks there is more work to be done.

Last month, the regulator set out its latest thinking on the subject in Accessing Suitability: Research and Due Diligence of Products and Services, published under TR16/1. While it is one of the shortest papers I have ever seen from the regulator, a theme weaved throughout: platforms should not be considered for life.

The paper is wrapped around a phrase we are likely to hear a lot more of – status quo bias. This emphasises the need for advisers to carry out ongoing research to ensure the platforms they have selected remain fit for their intended purpose, recognising that what clients need and want will have changed over time (think pension freedoms).

The upshot of this for advisers is they are likely to face even greater scrutiny from the regulator over whether or not the platforms they use to deliver their services and investment propositions provide the best possible outcomes for clients.

In an ideal world advisers would conduct detailed checks in advance of investing client money on platforms but, as I alluded to earlier, this has not always been the case.

Following this latest shot across the bows from the regulator now is a good time for advisers to review their stable of platforms. I am sure clients will not be surprised if there is a move.

Thankfully, for the majority of adviser-led platforms, there are no exit penalties applied to  client assets, meaning advisers are free to consider one over another.

So what must you do when a platform falls short of requirements? Well, one thing is for sure: letting clients hold their money on out-dated platforms is not the answer.

Perhaps it is not an emergency today but accumulating a number on so-called zombie platforms  does not seem a sensible position for anyone. Never more so than when it is plain to see the platform no longer serves its intended purpose.

How advisers ensure due diligence on their existing platform is robust is a matter for them. However, a statement on a client’s record that reflects on legislative changes, demonstrates a review of the platform market has been carried out and perhaps gives reasons why the current choice remains the best home for their money would seem like strong due diligence to me. No status quo bias or predisposed favouritism.

But recognising when a change is needed is one thing; doing something about it is another. It is not as straightforward as it needs to be to switch platforms but if the needs of the client are better served by investing elsewhere it has got to be done.

Challenging the status quo drives progress and judging by the FCA’s latest paper it is going to be an area of continued interest. So challenge yourself and your platforms. How can a platform  help you deliver the services you and your clients want?

If we do not question the ongoing suitability of platforms and their (our) processes, clients will not get the best out of us. So more research and due diligence is needed.

Dig deeper to challenge and understand the platforms you use and then take action. You will find platforms are not the plain vanilla some would have you believe.

Alistair Wilson is head of retail platform strategy at Zurich UK Life



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