Much more likely, it believes, is the need for multi platforms.
A wealthy older client who has built up substantial savings will have completely different aims and requirements compared with a younger client starting off with some regular savings. For the older client a wide choice of investments with possibly low transaction costs for switches may be of the utmost important, while the younger client will want a low cost product with a reasonable choice of funds.
Some platforms are best if you have very few transactions, while others may have a slightly more expensive administration charge but no transaction charges making switching or rebalancing cost effective.
Therefore, advisers have a duty to carry out thorough due diligence on the platform to ensure that it is suitable for each client’s particular set of goals and these are fully explained to the client before a decision is made.
The FCA is careful to stress that the outcome it is seeking is not simply making sure a spread of investments meets the independence rule, but rather that advisers are mindful of the range of product and investment options available across the whole of the market in order to maximise the level of suitable advice to their clients.
It comes as little surprise then that we are seeing increasing number of advisers considering outsourcing the investment side to discretionary fund managers for some of their clients. Research carried out by Investec earlier this year showed that the number of advisers who currently outsource to DFMs will increase this year as they seek help with the day-to-day investment management process.
The same research found that a third of advisers also plan to increase the number of client portfolios held on platforms. At present, advisers outsource 11 per cent of their investments to DFMs via a platform.
Of course, choosing to outsource may have a bearing on the platform chosen and this should be carefully considered, especially as the regulator has warned against advisers using DFMs as a default investment solution.
So what does the future hold for the platform industry in the wake of the FSA’s policy paper?
The long term effect should be to increase business for some of the wrap providers as the larger supermarkets continue to be volume players, offering a really good option at the lower and medium end of the investment business.
Originally designed to provide access to a wide range of mutual funds, their popularity has led them to develop and include other tax wrappers, such as pensions and unit linked bonds. We are already witnessing an increase in the number of investors using their low cost Sipp wrappers.
