Having run an international wrap platform for the past three years, one thing is very clear to me – there is no 'silver bullet' of a platform service to suit the needs of the global market because it is too diverse in its requirements. There isn't even a single silver bullet for each jurisdiction.
This may seem obvious to most experienced offshore advisers.
However, it is the range and diversity of these requirements that make the global market so demanding and yet so interesting.
At Platform One, we spent a good part of 2013 talking to advisers around the world in order to gain a better understanding of what they want from a wrap platform. We have many advisers across the Far East, Dubai, Malta, Gibraltar, Spain, France, Africa and Brazil to thank for their input and for helping us to acquire a greater insight into what is required.
Cutting the cloth to fit
The global market is best described as one that needs a range of different services to suit the varying combinations of tax environment, regulatory regime, target client type, individual client requirements and the advisers' business models.
Ideally, there should be an arsenal of platform service options available to offshore advisers. Each adviser could then select the service options that best meets their requirements.
This is our challenge at Platform One, and we are constantly developing our services to provide these options for international advisers.
A summary of our findings is provided in the table to the right and some of the main requirements are outlined below.
The winds of change
The first choice is between client agreed adviser remuneration and a commission-based service.
Regulatory change is clearly the key driver here as certain jurisdictions, including the UK, Denmark and Holland, now require the former.
The commission- based service will remain the main option of choice for most offshore jurisdictions for some years to come.
However, the regulatory drive to replace adviser commission with client-agreed remuneration or fee charging is spreading and will be adopted by other jurisdictions.
This is often via a path of full disclosure and then for 'independent' advisers, before being required for all advisers.
The client-agreed remuneration route is also being chosen by an increasing number of international adviser firms, particularly for their high-net-wealth clients.
They are taking this route in order to create repeat revenues and to add long-term intrinsic value in their businesses.
This echoes the development of the UK market where many advisers had already adopted a fee-based business model well before the Retail Distribution Review made it mandatory.
Key requirements
The next big issue is the differing tax requirements of individual jurisdictions.
Examples include France, Spain and Portugal, where only specific bonds qualify for tax purposes.
As a result, the platform has to be able to offer a range of products and services to suit the tax needs of different jurisdictions. In fact, it needs to be a 'whole of market' platform.
Advisers in these jurisdictions will recognise these requirements.
Closely following the requirements for tax are those for authorisation in each jurisdiction.
In some countries advisers can be authorised to recommend certain types of investment products but not the underlying investments.
In some they can advise expats but not locals, while in others there is no authorisation available for financial advisers.
Advisers in these jurisdictions often advise on the products and recommend the investments to go in them.
They then let the client purchase one or both on an 'execution' basis.
Any platform needs to provide this 'semi-advised' service for these jurisdictions.
Finally, there is the 'introduced execution only' service required by offshore advisers for sections of their client base. Although this is a more complex service to provide, it meets a major market need.
The right package
A platform must pull these services together to offer advisers a single online view for all of their clients and investments and enable them to manage these effectively.
This requires a secure, multi-currency, multi-investment, multi-product portfolio and dealing system with online access for advisers, clients, product providers, discretionary managers and trustees.
These facilities should also be available via smart phones, tablets, iPads, etc.
It will take time before all the global requirements of advisers can be met by platforms, but it will happen.
When this occurs, I expect that we will see the take-up of platforms dominate the international adviser market as it has in the UK, Australia and the US.
