The FCA alluded that some firms pick platforms based on factors that benefit them more than the client. But what benefits the adviser ultimately benefits the client.
Last week the Financial Conduct Authority (FCA) published the results from its thematic review on advice firms’ due diligence.
Although overall the regulator was pleased with advisers, stating the 13 firms reviewed were generally able to demonstrate some good practice, there was something that the FCA said that intrigued me.
During its review the FCA said that firms needed to ensure they were “adequately managing conflicts between their clients’ and their own interests”, as in some cases it saw that firms considered the services they received from a platform more important than the service received by the client.
The FCA said it was also disappointed that some firms were no longer reviewing platform options available to them because firms were happy with their existing provider.
There’s always some truth in what the regulator says. I’m not arguing whether some firms do pick service level as an overriding factor above all other points to consider when picking platforms and that decision may potentially disadvantage the client.
But I’d argue against the assumption that there is a conflict between what benefits the adviser and what benefits the client.
For most advisers, the good and honest ones out there – picking a platform because of the services it offers the adviser, benefits them which ultimately benefits the client. It’s not just the price of the platform that clients care about.
I’ve always thought the regulator has never understood platforms. A platform, as we know is no more than an administrative tool, it is a system.
It is not like the concept we have for picking a flavour of the month fund, picking a suitable platform is not the same as that.
For example, a platform’s client relationship manager might only look like they services the adviser, because they help the adviser with their use of the platform. When you’re dealing with an organisation on a daily basis, it is vital that you can reach the team and they can help efficiently and effectively. That might help me out for my work and my time, but that in turn is for the advantage of my clients.
There are some platforms that are a nightmare to deal with, it can be actually painful, and that is to my detriment which results in the detriment of my client if things cannot be processed quick enough or if things cannot be explained enough or corrected in time. This ends up damaging clients’ investments.
We are no longer in the inducements-culture era so I cannot think of any ‘services’ that platforms offer to advisers that are purely for the benefit of the adviser. Even platform educational events and CPD training boosts advisers, but boosts advisers so they can strengthen their services for their clients.
So I believe that for most advisers, there is no conflict between what best suits the adviser or client. We are there for our clients, and any service that helps our job helps the client – because that is who we are there for.