Picking a platform: 
Not an easy thing to do

Ten leading platform commentators were locked in a room last month to debate the future of the market. In the last of a three-part special, the team dissects the ways distributors select and use platforms.

AT8 has long been a fan of Sense’s approach to helping adviser firms create a platform strategy and we were pleased to have Sense managing director, Tim Newman, give the group a case study of how distributors can build a clear strategy and client proposition.

In essence, Sense helps its members create an investment proposition and client agreement and then align the platform strategy to these.

Selection process

Sense starts off the process for members by carrying out due diligence on key decision criteria such as financial strength and longevity. It then works with the members to complete the provider selection process, matching the central due diligence process to the services it offers, the type of clients it has and the level of interaction included in its service proposition.

Sense works closely with Annex 5 of CP 10/29 (since updated into Annex 3 of the recent FSA Platform Policy Statement – PS 11/9) and asks members to align with the descriptions in the annex.

The processes employed by Sense then enable it to build a compliant strategy with full awareness of the implications and responsibilities. Newman is seeing far more firms going to more than one platform, something which is increasing as FSA expectations are more widely understood (possibly out of fear).

John Porteous of RSM Tenon was also a supporter of the FSA paper. He said: “We largely agree with the Policy Statement. We have a preferred platform, but for a business our size we do not see how a single platform could realistically work for every client. However, the issue is how to knit together multiple platforms without creating operational chaos and adding unnecessary risk into your infrastructure.

“We have looked at the single custody model with multiple pricing structures which clearly has a propositional appeal, and certainly some will see that as the Holy Grail. However, we weigh that very carefully against the risk of locking in too tightly with a single vendor across the whole span of our business.”

Single platform practicalities

As a restricted network, Openwork is culturally more open to a single platform strategy although Phil Mogford, the RDR director at Openwork, said the practicalities and single vendor risk means the business will likely follow a dual platform strategy.

Porteous added that while he knows several independents following a dual platform strategy, he would be concerned if the ‘dual strategy’ was simply the addition of another platform with the same characteristics as he does not believe this helps with dealing with the exceptions from a firm’s core proposition, which is one of the reasons why a firm would adopt multiple systems. Multiple platforms with identical propositions would not seem to achieve this effectively.

Will Watling of Capita added an example scenario where a single platform strategy was seen to be failing. By putting a client portfolio which contained five product wrappers (including an offshore bond) into the Capita comparison service (Comparator), he demonstrated that a client on a single platform solution was £40,000 worse off over a 20 year period than when compared to a solution that contained one or two off-platform products.