Tech Review: Go compare! Go compare!

Mark Loosmore of AT8 Group reviews platform comparison tools.

Over the past couple of months, we have been looking at a number of the leading platforms that advisers are using to help enhance their service propositions and assist with the transition to the post RDR world.

It is unlikely that many distributors will find a single platform to address all of the needs of each of their clients all of the time. A far more probable scenario is that a distributor firm will choose a main platform and then have several additional platforms to complete their service offering and to ensure that they provide the most suitable customer outcome.

The FSA has fuelled the debate through its Platform Consultation Paper CP10/­29 issued in November 2010. Many interpreted the November paper as acceptance that a single platform is possible. However, as we pointed out at the time, the devil was in the detail, and we feel that Annex 5 of the report is particularly revealing in the caveats that would need to be addressed for single platform choice.

In Annex 5, the FSA stated that it believed that using one platform for all clients for all investments is likely to be very rare in the current platform market. It added that using one platform for all clients for most of their investments was a more likely scenario because, even when there is a defined category of clients, there are probably still going to be some ‘outlier clients’ that are likely to better off with another platform choice or need ‘off-platform’ products.

If we assume that advisers need to use multiple platforms, it raises the issue of how advisers selects which particular platform they use for which clients. Even in a world where an adviser uses a predominant platform, it is surely the case that there is a duty on the adviser to employ due diligence to the selection of such a platform, and to revisit and revalidate the choice they have made on a regular basis. Both scenarios made us look at the role of platform comparison tools that are intended to help advisers in their selection process.

Platformwatch

The grandfather of the platform comparison tools is Skandia’s Platformwatch. The tool was launched in January 2009, before the FSA raised the issue of single platform strategies.

Skandia’s goal was clear: many in the market assumed that the rebates provided by the wraps must be good and lead to a better deal for the consumer, whereas in some cases the charges of the wraps would take more back than they provided in rebates.

With an absence of any technology solutions on the market to illustrate the effect, Skandia launched Platformwatch. Initially the focus was purely on comparing platforms on price, but over time Skandia has extended its remit.

Last year, it launched a service to get under the skin of the charges and explore the dynamics of the different pricing structures. Skandia also launched a Platform Due Diligence tool that takes the platform factsheet the FSA produced in October 2009 and looks at the nine areas of due diligence within it, suggesting appropriate questions in each area. The tool provides Skandia’s answers to these questions and encourages distributors to ask the same questions to other platforms that they consider using.

New entrants

Last summer saw two new entrants to the platform comparison market. A company called Marketwatch launched Adviser Asset, and Capita launched Platform Comparator from Synaptic. Both products have gained a huge number of users very quickly, which is a reflection that the market is accepting the need for comparison services.

Adviser Asset now claims to have 9,000 IFAs using the service to compare the platform and fund charges, with access to more than 7,000 funds across 10 platforms. The platforms covered include:

• Ascentric;
• Aviva;
• Cofunds;
• Elevate;
• FundsNetwork;
• Novia;
• Skandia;
• Standard Life;
• Transact.

Its success is, in part, due to its early market entrance and innovation but also because the service is free to use for IFAs: revenue is raised, instead, through platform operator access charges and advertising.

Marketwatch has a long established history in benchmarking services both in the financial services market and outside of this in other industries, such as pharmaceuticals. It has produced a usability study on platforms for many years.

These reports have been generated through observing groups of IFAs participating in different tasks on each platform in usability labs. To date, Marketwatch claims that more than 250 IFA hours have been invested in this process. The Adviser Asset product was seen as the natural extension to the benchmarking.