How to explain the value of platforms to clients

They are a mainstay of most financial advice propositions these days. But how do you explain their value to clients? Jack Gilbert investigates.

Nick says...

If you want to create proper financial planning for clients, a platform offers all the facilities needed for managing funds. It is not impossible to ignore platforms, but financial advice would not be as slick or as easy.

I explain to clients the difference between the old world of investments, where you bought unit trusts directly and different products via different product providers, and the new. A platform is a trading facility that allows all the relevant wrappers needed to manage their ongoing financial planning strategy.

Our preferred platform is Nucleus, plus a bit of the Old Mutual Wealth platform. Every year a client receives a review. We present a report which shows what we are doing for the client: withdrawals, income distribution and capital gains tax (CGT) calculations.

With Nucleus, we might have a general investment account (GIA), an ISA and a pension. With the GIA (which is taxable), the client might have accrued gains.

We do not want to switch them and create liabilities, so we create two GIAs. One houses the model portfolios, and the other account allows us to isolate and deal with funds that are full with gains. All benefits are documented in client reports.

Platforms’ CGT calculators are also very important. It would be fundamentally impossible for us to do our job without CGT tools.

Top tip: Explain how platforms can be used to reduce CGT liabilities.

Top quote: 

'It is not impossible to ignore platforms, but financial advice would not be as slick or as easy.'

Nick Rippon is director at Rippon Financial Management

Nick says...

If you want to create proper financial planning for clients, a platform offers all the facilities needed for managing funds. It is not impossible to ignore platforms, but financial advice would not be as slick or as easy.

I explain to clients the difference between the old world of investments, where you bought unit trusts directly and different products via different product providers, and the new. A platform is a trading facility that allows all the relevant wrappers needed to manage their ongoing financial planning strategy.

Our preferred platform is Nucleus, plus a bit of the Old Mutual Wealth platform. Every year a client receives a review. We present a report which shows what we are doing for the client: withdrawals, income distribution and capital gains tax (CGT) calculations.

With Nucleus, we might have a general investment account (GIA), an ISA and a pension. With the GIA (which is taxable), the client might have accrued gains.

We do not want to switch them and create liabilities, so we create two GIAs. One houses the model portfolios, and the other account allows us to isolate and deal with funds that are full with gains. All benefits are documented in client reports.

Platforms’ CGT calculators are also very important. It would be fundamentally impossible for us to do our job without CGT tools.

Top tip: Explain how platforms can be used to reduce CGT liabilities.

Top quote: 

'It is not impossible to ignore platforms, but financial advice would not be as slick or as easy.'

Nick Rippon is director at Rippon Financial Management

Justin says...

We tend to use Alliance Trust Savings (ATS). Our typical client portfolio is around £600,000. Because ATS has a fixed annual platform fee, it saves our typical client hundreds if not thousands of pounds a year, compared with percentage-based rivals.

We are not too reliant on platforms for tools such as capital gains tax calculators, as we tend to do most of that stuff ourselves. We treat the platforms almost as a commodity to hold investments and place deals. Primarily, platforms make clients lives’ simpler.

Clients come to advisers for us to take away some of the hassle. But they also appreciate being able to log in and see all of their investments whenever they want online.

This would not necessarily be the case if they had three of four legacy pensions with life companies, who send them half-a-tree-worth of paper every year for each policy.

Because platforms use cleaner share classes, they tend to be cheaper. People who have gone direct to fund managers in the past often find the fund charges are higher. So, even after factoring in fees, platforms can save money.

As part of the advice process, we get to grips with what their existing investments are costing them. We give them an idea of what it would cost if they followed our advice. Nine times out of 10 it would be cheaper for them to do so.

Top tip: Platforms are cheaper than going direct. Show clients how this is the case.

Top quote: 

'Clients come to advisers for us to take away some of the hassle. But they also appreciate being able to log in and see all of their investments whenever they want online.'

Justin Modray is director at Candid Financial Advice

What Twitter thinks...

We asked the financial planning profession on Twitter for their views on explaining the value of platforms to clients. 

Here is what they said.

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