Questions over due diligence, client segmentation and charging, together with the recent pension rule changes, will force the platform industry to step up its game to better serve clients, says Axa Wealth's head of platform proposition, Steve Owen.
We are fast approaching the end of another year; I know this because Strictly Come Dancing is one of the programmes once again dominating Saturday night television in the UK.
At this time of year we find ourselves questioning what have been the most important moments of 2014 and what is likely to be on the horizon for 2015.
When it comes to the world of advisers, platform due diligence has been one of the key focus points for the UK regulator. It seems conversations about how many platforms are the right number and client segmentation are ever present in our world.
Our own experience has been that most advisers do segment their client bank, and most platforms out there have segmentation tools that can help with this. In addition, there are independent specialists who can assist with client segmentation.
On the issue of what number of platforms is appropriate, there is no hard and fast rule for this: it will depend to an extent how diverse the adviser’s client bank is. In reality, most advisers don’t use one platform, but rather two or three, although they might use one of those platforms for 50% or more of their clients.
As long as a platform is broad enough in terms of the product wrappers it offers, the funds available, the tools for advisers and services it can provide, then one platform can be suitable for a large range of clients.
The way consumers are charged for platforms, funds and advisory services remains under the spotlight since the retail distribution review. I could write an entire article on charging alone but I believe the key point in the future is going to be the total cost of investment. And here, I don’t think comparison across the market is that easy at the moment.
I would hope in future we will see a move towards clarity in the total cost of investing, rather than advisers and their clients having to add together the composite parts.
I would wager that any look back at 2014 will focus on the Budget in March, and the increased freedoms for savers and pensioners we will see from April. The retirement market was already undergoing fundamental change due to an ageing population but the 2014 Budget overhauled the pensions system as we know it.
The industry must now step up to provide access to the new freedoms and flexibility being introduced.
We expect the pension changes to accelerate flows onto platforms as they allow financial planners and their clients to spread wealth easily over multiple tax wrappers. They also provide flexible ways of retrieving income and are a place to store and invest the money you have.
Finally, an area for growth for platforms next year is international portfolio bonds. This is a trend we have seen in recent years but links to the previous point. The increased flexibility in how people save, invest and access their money opens the way for a more diverse range of solutions.
From the perspective of Axa Wealth, we have seen the proportion of international portfolio bonds written on the platform increase and we expect this will grow further. As a result, platforms and international bond providers need to continue to work together to make dealing between the two as smooth as possible.
A veritable Argentine Tango if you will excuse the Strictly Come Dancing pun. Let’s just hope the industry ends next year with a higher collective score than a seven from chief judge Len.