Platforms have revolutionised the wealth management industry over the last decade by taking away much of the painful administration that IFAs used to have to grapple with.
The surge in the use of platforms is very much aligned to the bigger trend of more advisers choosing to outsource their investment decisions to a discretionary fund manager (DFM).
While the percentage of advisers outsourcing investment services overall has increased by 1 per cent over the past year, the use of discretionary management services has gone up by 27 per cent, according to research published by Defaqto in April.
And when the growing popularity of DFMs and platforms are considered together, investors have a winning formula. DFM services are provided on platforms at lower cost than going directly to the DFM, making them more easily accessed and offering very good value.
Who would have thought 10 years ago that sophisticated discretionary services, previously the domain of the rich, would now be accessible to the average retail investor?
It’s well known that there are pressures across the industry for fund groups, platforms and advisers to drive down what clients pay for a service. But we should not lose sight of the value that we deliver to investors - quality financial advice is something that clients are prepared to pay for and should never become commoditised.
Costs to the client are always important, but as an industry we do need to think more laterally about how we innovate and deliver value. For instance why do we use collectives like unit trusts? It is probably because they are an easy way to trade securities.
But what if we didn’t need to pay for the unit trust collective wrapper, would that make it cheaper for the client? The answer is probably yes.
While DFMs have developed models that invest directly into securities (Thesis always has), it is only in recent times that platforms have started moving towards the functionality that can trade stock at a reasonable price as they see greater demand from advisers and clients.
We are in active discussions about how we deliver these lower cost models with platform providers. But, as always, some – such as Standard Life, Fusion, Novia and Nucleus – are much more forward-thinking than others.
Platforms have always been in a unique position to be able to bring together a number of different providers under one roof, but some need to go further in working with best-of-breed partners so that advisers benefit.
The platforms that will win in the long-term will be the ones that focus on advisers and do everything they can to make their lives easier, such as linking direct to firms’ back office systems and allowing client reports to be easily created.
Forward-thinking platforms play to their strengths by focusing on providing technology and functionality. Unfortunately there are still some platforms that try to be all things to all people and, as a result, fail to deliver on the basics.
