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Up your platform review game to avoid de facto restricted status, IFAs told

A recent paper from The Lang Cat called on IFAs to regularly review platform suitability. Jack Gilbert gauges the reaction, from the sarcastic to the supportive

Up your platform review game to avoid de facto restricted status, IFAs told

IFAs have been warned about the impact of platform due diligence on their independent status.

Last month, a paper from platform consultancy The Lang Cat (which was sponsored by AJ Bell) looked at the barriers to switching platforms for IFAs and how these difficulties can be overcome.

It said new regulation, such as the product intervention and product governance sourcebook (Prod) rules, means IFAs have an added obligation to carry out regular reviews of clients’ platforms. The Lang Cat said advisers must regularly check whether the platform being used is still the most suitable and cost-effective option for particular clients.

‘If your ongoing percentage-based charge doesn’t cover stuff like this [platform switch reviews], what does it cover?’ the report said.

A number of advisers criticised the report on Twitter and in the New Model Adviser® comment section.

‘Nick Rippon’ said: ‘Our ongoing fee is all encompassing and if moving platform is beneficial, we will address this without charging additional fees.

While Alistair Cunningham (pictured above), chartered financial planner at Surrey-based Wingate Financial Planning, tweeted, and not without a dose of sarcasm: ‘Another option (pretty radical this one), if we are switching based on lower cost, is to speak to the existing platform and ask for a lower platform charge. Amazingly that works.’

Regular review

Should advisers not be reviewing their clients’ platforms each year or not?

There seem to be many advisers out there who would argue against regular platform switching – seeing this as an extra cost to clients or their firms. The Lang Cat’s survey of 95 advice firms found the average cost of administering a platform switch was £1,155.

However, there are many who feel platform reviews should take place on a regular basis to see if clients could be better off on a different platform.

One such adviser is Justin Modray (pictured below), director at Oxfordshire-based Candid Financial Advice. He said advisers should be reviewing platform selection each year, just as they look at fund selection.

‘If you are an independent adviser, you should without doubt be reviewing at least annually whether the platforms you use for your client remain both appropriate and cost effective. It should be no different to a portfolio of funds. The platform is just part of the advice mix and it should be covered by the ongoing advice fees,’ he said.

‘There is no doubt it should be happening, but in practice I doubt it is happening as much as it should be.’

He said there are two main barriers to stopping platform switching: IFAs building their own administration around the platforms (and becoming very close with them); and ‘apathy’, with advisers avoiding extra work for which they may not get paid.

Modray went even further and said he would not be surprised if advisers later chose, or were forced to, go restricted because of their lack of platform switch reviews.

‘To earn the right to be independent you should be prepared to review these things at annual reviews. If you don’t do that, by definition you are restricted because you are not looking at the whole of the market,’ he said.

Paper pains

However, there remain barriers to switching. One New Model Adviser® website commenter, ‘Alex Morrison’, said he has moved clients into different platforms following a segmentation exercise (itself prompted by Prod rules).

However, he found the transfer process to ‘be an excruciatingly painful process’, costing him 10 hours per case and a ‘gargantuan’ amount of paperwork.

And yet, it was worth it for the clients. By switching platforms, the adviser claimed he saved four clients £312, £567, £917 and £1,902 annually.

As many platforms have a range of charges, it is inevitable clients could save money by switching, particularly over the long term. This process is not easy. But given the opportunity to save precious basis points, it certainly makes sense for IFAs to question whether some clients may be better served by a different platform.

The question of who should pay for the switch, the adviser or the client, is a different matter.

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