The following blog post is an extract from The Happy Financial Adviser. An Amazon bestseller written by Truly Independent Director Andrew Goodwin. To purchase your own copy click here.
One area of development that has changed the way we advise clients combines technology and products, putting all your client’s funds in one place which has the advantage of being easier to monitor value and performance. Traditionally, a client would expect to get a statement from their adviser or individual investment company twice a year, but with the development of fund supermarkets and now platform wrappers, this approach has changed the way product providers communicate with their investors. Buying funds through a supermarket means you and your clients can monitor them every day.
Unfortunately, some platforms and some financial advisers have made these platforms unnecessarily complicated. What most clients want are answers to two questions:
•Valuations – What is my investment worth today?
•Reassurance – Is my investment still right for me?
A platform that focuses on those two wants will provide the minimum cost to run the platform making it affordable and provide enough functionality that will last.
But just as most investors became accustomed to fund supermarkets, the investment industry started to use words like ‘platform’ and ‘wrap,’ confusing many clients (and some financial advisers). So how do these entities differ from a fund supermarket?
The distinctions are not clear-cut, which is possibly what confuses investors. In short, a fund supermarket can be called a platform and, on that platform, an investor can access wrappers such as ISAs (Individual Savings Accounts) and SIPPs (Self Invested Personal Pensions). So, a (tax) wrapper is a product, which has a choice of funds available, selected from the platform. The question that follows is, therefore, is a platform a product?
A simple way to remember which is which, is to consider a fund supermarket as being offered to investors directly, but platforms and wraps are terms used by financial advisers and are a reference to the method by which they manage investments on behalf of clients.
In fact, no less a body than the Financial Conduct Authority (FCA) has viewed platforms as online services used by intermediaries (and sometimes consumers directly) to see and manage their investment portfolios.
So, a platform is not considered as a product, regarding regulated products but the wraps that sit on the platforms are, such as ISA and SIPP. But it has to be pointed out to financial advisers that a platform is indeed a product suitable for your business support functions, just as other technology used in your office. It could be argued, therefore, that by restricting access to just one platform, you have restricted use of the product range under offer on that platform. By interpretation, an independent financial adviser would need to ensure all product types are available. But to be a truly independent business, a firm should make sure all platforms (although not products per se) should be accessible too, within the business support reason of functionality and usefulness.
