Platforms have become an integral part of the UK advisory space with nearly all Independent Financial Advisory (IFA) firms using at least one or more platforms to facilitate their client’s investments. Platforms have led, amongst many other things, to increased choice for advisers, reduced cost for clients and scalability for IFA firms looking to grow their client base.
The UK has taken its lead from the Australian market where platforms have been around for 20 or so years and the market has undergone a period of consolidation, primarily involving insurance companies with all the independent brands still going strong. What is then perhaps surprising is the relatively slow pace to date which platforms have emerged in the European space.
It is quite evident that a fragmented, commission driven environment seems to be the ‘norm’, with clients regularly experiencing up front commissions extending to around and upwards of 5% in many cases, which coupled with product kick-backs from certain bank traded products, and exit fees, can sometimes cause the clients portfolio performance overall to become trivial – not the desired outcome for a pension pot!
With European regulation such as MIFID II driving change and pushing hard for transparency and client protection across all its European members, the anticipation is that IFA firms using offshore bond providers or insurance companies to invest client’s monies will eventually become a thing of the past. The expectation is that more financial products are likely to soon come into scope and under the scrutiny of the EU regulation as practices detrimental to the client become exposed.
Clearly, in some segments, the European financial advisory environment outside of the UK is not currently working in the interests of its consumers, contrary to what MIFID regulation is aiming to achieve. What is evident however is that a number of firms are anticipating that their business models need to adapt from product fee commission driven business, to ongoing client charging.
The UK regulatory environment banned advisory remuneration from product providers to advisers with the introduction and evolution of the Retail Distribution Review (RDR) in late 2012. This has led to a much more competitive space where clients have ultimately benefitted from a much more price sensitive, transparent market place where clients can have the confidence the system is not ‘playing them’ – it is playing for them. The expectation and view is that European firms are beginning to follow the UK’s lead, anticipating MIFID II clamping down on previous commission heavy practices. This is where platforms come in.
Platforms offer a transparent way in which clients’ money can be easily invested into the market, offering IFA firms the option to charge ongoing fees for the services they provide their clients. Firms such as Novia Global offer European and Global IFA’s access to an FCA regulated platform, coupled with market-leading Australian technology and custody provided by a large blue chip bank.
In addition to this a paperless application process with the ability to invest in a range of currency options (GBP, USD, EUR, CHF, AUD, HKD) and the ability to FX clients’ money for an institutional cost of 0.07% at the click of a button. These options along with access to over 5000+ assets gives rise to a compelling proposition for IFA’s. For the IFA’s clients, the benefits are greater. Access to online, real-time valuations available 24/7 allows uninterrupted access for clients globally, where previously it may have been unavailable to them without requesting directly from the provider. Platforms seem to be the future of the advisor led European space – a case of watch this space!