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Post-RDR: IFAs' Criteria For Selecting a Platform

Emma Napier of Platforum discusses how IFAs will conduct due diligence when selecting a platform following the Retail Distribution Review

Jon Standring 29 November, 2012 | 7:00AM

This video is part of Morningstar's special series on the Retail Distribution Review (RDR).

Jon Standring: Today we're going to be talking about the criteria financial advisers need to use to select platforms for their individual clients. 

Today I'm joined by Emma Napier, head of adviser relations at The Platforum. Welcome, Emma. 

Emma Napier: Hello. 

Standring: So, the FSA have given guidance that platforms must be selected for individual clients. Does that now mean that financial advisers can't use a single platform?

Napier: Yes and No. The FSA have said, and they do reiterated it in some of their guidance, that it is unlikely that an adviser firm can use one platform 100% of the time for 100% of their clients. It's much more likely that they could use one platform for the majority of their clients. And what they have to think about is that what are they going to do for that one client that walks through the door where that one platform doesn't fit. So it's having a solution for those clients as well. 

So, really, it's just down to the IFA to make that call as to whether they need one platform or whether they're offering different services and therefore they need multiple platforms. 

Standring: Okay. So, selecting the platforms, what are the top four or five criteria that advisers should be looking at? 

Napier: Again, the FSA have a fact sheet. I feel like I've come equipped with fact sheets. But they detail,in the factsheet things that advisers should look for. But it's common sense. It's things like financial stability. It's things like functionality; what do you need the platform to do for you? It's things like service; how good are they at providing that service? Funds and tax wrappers; has the platform got a sufficient range of funds and tax wrappers for you to deliver your service? Things like tools; do you want to be able to use platform tools that are derived from the platform or actually do you source those platform tools yourself and you just want the thing to integrate well? And, of course, price. 

Standring: So, as an adviser, [if] you’ve selected a platform for a client, how frequently do you need to re-evaluate the platform? 

Napier: Again, not a straightforward answer. I think if you are a firm, I don't know, in the depths of Cornwall and you've got 50 clients, you're offering the same service to all of those clients, you've had those clients for the last 100 years, they haven't necessarily changed much, then it's probably likely that the platform that you've selected ticks the boxes to enable you to deliver that service to those clients. 

On the other end of the scale, if you're a firm that is buying other firms, merging with other firms, it's likely that your client bank is changing all the time. So, you do need to make sure that you reevaluate the service that you're delivering and you choose a platform that's relevant for your clients. 

Standring: And what's the most frequent question you get from advisers about selecting platforms? 

Napier: Probably the ‘can one platform work for us?’ is probably the biggest one. But I also get asked by advisers ‘where do I start?’ ‘There's 28 – probably an increasing number of – platforms in the market, how on earth do I start evaluating which one is right for me?’ And the third thing that they all say is ‘all the platforms say they are the best so, again, where do I start?’ 

Standring: Thanks Emma. For Morningstar, I'm Jon Standring. Thanks for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author Jon Standring

Jon Standring  is Adviser Liaison with Morningstar UK.