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Putting clients’ needs first – why platforms are helping to drive excellence in financial planning

  • By Jason Stockwell

The platform market has become one of the financial services industry’s greatest success stories of recent years, as Aegon’s Steven Cameron explains. In this article he lifts the lid on the use of platforms by advisers and concludes that improved client outcomes are the real driver behind their rising popularity


Nine years ago, back in 2011, the value of assets managed on advised platforms was just *£150bn. That value has now risen to **£516bn, with assets up **22% in the last year alone. While there are a small number of large D2C platforms, this is primarily an intermediated market. It has been the recognition by financial advisers of the benefits for clients as well as their own advice propositions, which have been the driving force behind this growth in platform usage. In this article I will look at what advisers report as the biggest factors encouraging their use of platforms and assess why what was once a niche service is now rapidly replacing the traditional life office business model.

Survey findings

Last year, Aegon undertook a series of research activities to assess how financial advisers were feeling about the outlook for their businesses, their clients’ finances and their use of technology. The Adviser Attitudes reports found advisers to be in a bullish mood, despite the headwinds of Brexit, political uncertainty and further regulation. 76% of advisers said they expected to see an increase in the number of clients they were servicing, while 81% said they had seen their turnover increase in the previous twelve months.

In particular, what advisers said about their use of technology and platforms was both fascinating and encouraging in its customer or client focus. As Table 1 shows, the top reason for advisers using a platform was to give clients access to broader investment choice (63%), followed closely by the convenience of being able to manage investments from a single portal (58%). 38% said they were a more cost efficient way of managing their business, which can of course have knock on benefits for lients, particularly when regulation and associated levies put upward pressure on advice costs.

There was close alignment between why advisers use platforms and the benefits advisers saw for clients with 66% of respondents saying that the greatest benefit to the client was the ability to view their investments in a single place, while 63% thought the wider investment range was the biggest client benefit.

FCA study underway

Given the rapid growth of the industry, it is perhaps not surprising that the FCA has undertaken a review of the platform market to see whether competition is working well. The interim findings of the study have largely given the industry a clean bill of health. While a number of potential issues have been highlighted, the majority of these relate to non-advised platform customers or with the platform industry itself, rather than advisers and how they’re using platforms. For example, the FCA wants to explore how to make it easier for direct customers to switch platforms and is hoping the Transfers and Re-registration Industry Group will lead to improvements in transfer timescales and communications. It is also exploring standardised risk labelling for model portfolios and wants to address any practices which dampen platforms’ ability to compete to receive discounts from fund managers.

We’re living in an age of rapid technological change. While platforms need to keep investing in technological advancement, it’s important ot to lose sight of how to harness that technology for the long term benefit of its users. From the perspective of advisers and their use of platforms, the combination of convenience, choice and cost efficiencies are a powerful trio of positives which suggest a genuine social utility. Our research showed clearly that when talking about the benefits of platforms, advisers don’t talk about the benefits of technology in isolation, but about the improved client outcomes and business efficiencies which they enable. It’s against this backdrop that platforms will increasingly sit at the centre of financial advisers’ businesses as they serve their clients’ needs.


References

*£150bn figure – Platforum, September 2016
**£516bn/22% growth figure – Platforum, March 2018

Steven Cameron is Pensions Director at Aegon

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