The policy statement covered pretty much what was expected and there are a few sensible pragmatic changes, which the FCA has added.

That said, I can’t help but thinking that the intent and the outcomes still leave a lot of questions and fail to address some of the key issues in the market which would help improve consumer confidence and commitment to save. Perhaps I am being too idealistic here, but I can’t see how a further three years of complex transitional arrangements will help deliver the intended outcomes. My logic is explained below and we intend to publish additional blogs on each of the themes in the coming weeks.

Perhaps I am being too idealistic here, but I can’t see how a further three years of complex transitional arrangements will help deliver the intended outcomes.

For now, I have to say I am a disappointed with the paper and I think the FCA need to be more ambitious if they are to really drive and shape the necessary change needed to deliver their stated intentions, as listed below:

1. The new rules protect consumers and promote effective competition.
2. The outcome is in line with the broader RDR objective of limiting the influence product providers have over distribution.
3. The new rules align the interests of intermediaries and their clients.
4. The rules improve the clarity of service offered by firms to consumers.

The Outcome Reality:

1. Pressure on Advisers: The rule changes force the adviser closer to the customer and make further demands on advisers to police the arrangements platforms have with products and funds. If they are not meeting the rules and advisers are using them both will suffer consequences, but the adviser is expected to be clear on how platforms are meeting their obligations both now and on-going.  This means that platform due diligence needs to be top of the agenda for those advisers using platforms.  We often find that evaluations are not complete or documented and are not consistently applied across advisers in a firm.  Clearly advisers need to be on top of their game with this going forward.

We often find that evaluations are not complete or documented and are not consistently applied across advisers in a firm.  Clearly advisers need to be on top of their game with this going forward.

1. Transition Chaos:  Long transition periods are not in the interests of the consumer, the market or indeed providers – it creates complexity for a long period of time (three years) and also promotes a ‘buy now whilst stocks last’ mentality where the reality of the situation is that some will delay changes until the last minute to take advantage of the transitional arrangements.  The FCA need to police this and take steps to ensure this does not happen.  Having said that, the horse has now bolted and the FCA need to be clear how they will police this risk.

1. Product & Fund Bias: The rules still leave too much room to create differential pricing which offers no real benefit to clients.  Again, the FCA will need to keep a close eye on this and I would expect to see further tightening of rules and guidance in this area.

1. Real Costs to Clients:  The additional obligations on advisers, the cost of the changes to platforms and the complexity of the long transition means that consumers may not see the real positive consequence of PS 13/1 until 2016.  That’s a shame because it’s likely that between now and then market and environment conditions will have completely changed and issues arising from the transition will force a re-think of the policy statement, leading to another significant change in direction. All of this will cost clients dearly and mean that the focus is not on helping clients understand how to save efficiently and compel them to do so, but rather on policing an overly complex transitional state.

1. Some Light in the Tunnel:  Platforms need to help advisers and clients by creating simpler user interfaces and services, linking the supply chain, improving reporting and self service capability.  Some are rising to the challenge and some have got a bit stuck with RDR and other internal change which means they have lost their way. There are some encouraging signs in this space that indicate the market is beginning to get to grips with RDR policy direction.  The challenge is that the failings of a few may impact the valiant efforts of others and the FCA need to avoid putting barriers in place that will shade this light.

The post FCA Policy Statement – PS13/1 appeared first on Platform People.

RDR means advisers will regularly review their platform choice to test on-going suitability, so successful platforms must religiously invest time in listening to clients and improving propositions in line with their needs and feedback; failure to do so will result in new flows going elsewhere. I appreciate that I am teaching you all to suck eggs so far, I hope.

There are platform businesses that have spent considerable effort on cost cutting

Eggs aside, there are a lot of instances out there where this is plain to see. Some of the early platforms didn’t invest in straight through robust and scalable processes and when the doors opened to new business… well the rest is history.  Platforms have been bought with incomplete due-diligence and there are many people out there telling me how much harder it is to turn a profit than they initially thought – platform businesses are complex businesses.

Likewise, there are platform businesses that have spent considerable effort on cost cutting, and whilst there is a profit showing due to the reduced operational costs, they may struggle to differentiate and the inflows will tell the real story.

It’s the same with outsourcing. The major risk is that the sole focus goes on the migration and not the business after the migration. Simply put, this will cause a real headache further down the line.

Only reworking compliance whilst putting changes in place for BAU will simply not cut it.

What makes this even more complex are the new entrants lining up to join the platform space; your current customers probably already bank with them. In 18 months to 2 years, I believe the competition will be more advanced and only reworking compliance whilst putting changes in place for BAU will simply not cut it. Well, unless you are preparing for a cheap sale!

It is vastly important for platforms to understand their own value and understand where and why their clients and customers are willing to spend money. They need to work out where their profit will be coming from in 3 to 5 years, as innovation in the market seems to waning, yet the pond is filing up with big fish and soon we are going to need a bigger pond.

Are you clear how you will keep your existing customers and win new mandates?  Are you capable of finding the right balance between investment to keep the lights on, and innovation to create genuine differentiation and compelling reasons for customers to invest with you?  Are you clear how you will cope with the downward pressure on margins and do you have a clear strategy that will deliver profitable net inflows over the next 3 to 5 years? These are just a few of the questions we believe need to be answered by Platforms in a market where innovation seems to waning….

We are constantly looking at ways to innovate with the platforms we work with, as investing in this will keep our clients ready for the future.  The platforms that survive will be easy to use, easy to understand, have simple compelling propositions and will invest on really listening to their customers and clients, as well as being efficient, compliant and scalable.

I know Apple is a well-worn business metaphor, but one of the biggest issues Apple faces is the their lack of technological advances. They have since been overtaken by a ‘small’ company in Korea that makes TVs. Can you imagine what the market will be like in 18 months when the focus is back on platform investment, only to find that Samsung have a platform or the major banks use a more innovative and cleaner offering?

Platform People will be holding an online debate using an expert panel – if you would like to register to join this debate, please send an email to chris.hitchens@platformpeople.com.

The post Platform Under-investment and the Effect on Net Inflows appeared first on Platform People.

Also, it was a nice surprise to find that when I went on stage this year, everyone was of normal height, the last time I did it, I was stood between Greg Davis and Peter Mann from Skandia (I think you can just about see the top of my head on the photo!).  We sponsored the Best Platform Award again this year and with a welcome sense of deja-vu, it was great for me to give the award to Skandia yet again. However, I have to admit to being slightly nervous having Martin Davis CEO Cofunds, also nominated, on our table!

Now, these award ceremonies normally baffle me; the compere rolls out all of the old jokes from the latest DVD and we all make polite small talk, yet there always feels to be a giant elephant in the room – the majority normally revert to ‘polite party mode’ and miss the opportunity for a good debate with their peers.

It surprised me as to just how much alignment there was around our table, and also that rolling out the polite party mode is a wasted opportunity in these circumstances.

But, I can safely say that with Kevin Russell and Paul Hitchen from Platform People and the all-star line-up on our table, as mentioned: Martin Davis – Cofunds, Mark Links – Sanderson House, Paul Holland – All My Plans, David Emsley – FNZ and last, but not least Geoff Towers from L&G, no stone was left unturned. We had a healthy dynamic with lots of topics to go at and of course a few to give a wide birth!

The topics that stood out most were differentiation, speed to market and the price of not getting things right first time, with me, Geoff and Kevin reminiscing about days gone by and the fun we had! We had a great discussion around platform profitability, with aligning views as to where this is all going: Casting the net wider into say Europe was discussed as well as consolidation! The simplicity needed on platforms and especially the clarity needed around products. We discussed the D2C market and how companies were going to cater for the increasing numbers of people who don’t want to pay for advice.

It surprised me as to just how much alignment there was around our table, and also that rolling out the polite party mode is a wasted opportunity in these circumstances. We only get a chance every now again to talk about stuff like this with all those people around one table in such a paradoxically ‘informal’ setting.  So, Money Marketing thanks for another great opportunity.

I have to say that by the end of the night we all left the table with a buzz around innovations and the shape of things to come; this was quickly quelled by the giant queue for the cloakroom! But what a great night; once back home that night I sat there wondering which company will be the first to run a platform through Google’s new glasses… that reminds me, I really need to up skill our development team!

The post Money Marketing Awards 2013 appeared first on Platform People.

A number of firms that have been charging high rates of commission on investments will need to focus on their protection sales to compensate for the loss in income from investments until their fees increase to avoid posting significantly reduced income levels. I do believe that many Companies have underestimated this drop in income and the impact it could have because this will take a considerable amount of time for those who are not prepared and there will be some casualties as a consequence.

We will soon find out the numbers left in the industry but the anticipated numbers leaving has been estimated between 8% & 33% so it would appear that nobody really knows?

We will soon find out the numbers left in the industry but the anticipated numbers leaving has been estimated between 8% & 33% so it would appear that nobody really knows?

As we look forward to 2013 there are a number of areas outstanding that we need the guidance form the regulator on such as “VAT charging” and “Long stop” clarification which are badly in need.

The importance of Platforms will undoubtedly grow through 2013 with of IFA’s delivering their Strategy via their client proposition. The development of the platform market and functionality will be driven by client needs and the IFA community striving for improvements in technology which has seen many developments with the introduction of iPad’s and tablets which more and more advisers are embracing.

Since launching our Platform Due Diligence review service we have seen a steady increase in demand from Firms and individual IFA’s to aid their selection based on their client segmentation and client offering.

There will still need to be considerable investments from the Platform providers to remain competitive and more importantly profitable as we will see several new Platforms enter the market it is inevitable that several will leave.

The average cost for platforms at the start of 2012 was 35 basis points but downward pressure has reduced this to 25bhp with many also reducing administration costs as well. With the Platform market set to continue growing it is encouraging to see that the likes of Skandia are focussing on quality and efficiency as they plan to launch more packaged solutions through 2013. We still need clarification from the regulator on cash rebates, execution only platforms and the ban on payments between fund groups & Platforms which will over run and put pressure on implementation dates.

All of this change will help benefit the client which is the desired and preferred outcome  but we shouldn’t underestimate the cost to the industry to implement these but with 2013 upon us let’s hope that we can all benefit and prosper in a more transparent and professional industry?

The post The Development of the Platform and IFA Community in 2013 appeared first on Platform People.