By Holly Mackay, Managing Director, The Platforum
Some rumblings on Twitter this week after a piece we wrote on the growing amount of advisers who are re-considering using or adopting a secondary platform in light of recent FSA publications and pronouncements. The FSA has pointed us towards this 4 page factsheet as a useful read for advisers and has clarified some points with us.
The factsheet states that “using one platform for all clients... is likely to be rare, if possible at all...” and that “using one platform for the majority of clients... is a much more likely scenario because the independent adviser firm is considering off-platform solutions where this is suitable for all or part of a client’s portfolio”. These sections have been highlighted to us by the FSA.
We see examples of adviser practices using one primary platform who have also adopted a secondary platform - typically because it is better priced for smaller or larger clients OR because it offers access to particular investments or satisfies a particular customer need. Where necessitated by clients, we talk to many advisers who will also advise on off-platform stuff. This will typically be a price-led decision, an investment or asset availability issue or simply because the adviser thinks a specific job can be done better off-platform. For example, more than half of the advisers we interview on an ongoing basis write DFM business off-platform.
The element that the regulator thinks sometimes gets lost in articles and blog comments is the number of the clients to whom the platform is recommended – quite often the discussion is just around the number of platforms used by any adviser. For those who say that using one platform is tantamount to being restricted, according to the FSA, they "are close" if they are referring to using the platform with all clients of the firm. Nonetheless, the FSA has not completely ruled out the possibility of a firm using a single platform for all its clients and remaining independent (but this would only work in very specific, limited circumstances and the FSA is clear that the onus would be on the firm to demonstrate how it meets the independence rule). The reason we think it difficult to have generic conversations about this is that there is no one formula which will illustrate compliant TCF behaviour - it's not as simple as one platform bad, two platforms good. The starting point has to be the clients of an advisory business and what their needs are.
As our business our focus is typically on platform use and adoption, but considering off-platform assets is of course important too as platforms don’t support every asset or may not be a competitively priced option for any individual client. Once again, the main thing we hear whenever we talk to the FSA is that any consideration should start with client suitability not with the “how many platforms should I use” old chestnut. It is likely that most independent firms moving forward will consider the blend of off-platform assets, a primary platform and where necessitated by the clients of the firm, a secondary platform.