Posted in: Wealth Management Administration
For more than twenty years, platforms have simplified the business of managing client investments, reducing administration, and allowing advisers to have additional time to focus on financial planning and advice.
The first fund supermarkets revolutionised access to funds, using technology to collate information, automate, and streamline processes to improve reporting and simplify fee calculations and payments. Modern platforms have evolved further, delivering secure online access to an ever-increasing range of investments and wrappers, alongside trade execution, record keeping, and custody services.
Over the last two decades, the number of product wrappers on offer has increased significantly, from general investment accounts and simple individual savings accounts (ISAs), to include numerous tax efficiency options through the extension of ISA products, wrappers for retirement funds, products aimed at children, and more. Each has its own set of rules for subscriptions, reporting, and underlying investments.
Advisers can add immense value to clients by taking advantage of all the options available and recommending a mix of product wrappers within their client’s investment portfolio. Unfortunately, because of the way the platform market has matured from fund supermarkets, trading platforms, and specialist pension providers to today’s elaborate wealth solutions, the availability of different product wrappers varies widely between providers, with no single platform offering the complete range.
An analysis of 26 advised platforms conducted by the lang cat found that while all providers offer a stocks and shares ISA, only two include a lifetime ISA. Similarly, 25 of them have a core self-invested personal pension (SIPP), while only 15 have a full SIPP, and just eight include a junior SIPP option. 25 providers offer offshore bonds, yet only 14 include onshore bonds. There is only one platform that offers 13 of the 14 most common wrappers available. In contrast, one third provide half or less, and the average is only 60%.
Without access to all products in a single solution, many advisers must use several providers to access the entire range of products needed to service their clients effectively. This often means navigating through different administration systems to support individual products such as pensions, ISAs, investment bonds, general investments, and annuity policies.
Coordinating with several parties on and off-platform while managing the administration of numerous systems, policies, processes, and procedures is time-consuming for adviser firms. A lack of integration between different partners and back-office systems can also require rekeying of information, adding more time and increasing the risk of human error. This makes it difficult for advice firms to scale effectively and quickly adapt to the evolving market environment and changing regulations.
From a financial planning perspective, numerous administration platforms can create difficulties in delivering the most tax advantageous options for a client when selecting which wrapper to use to draw an income, or when funding the application of one product from another. The total cost of a financial plan with numerous accounts can also be higher than consolidating assets with a single provider.
The lang cat research lists 35 wrappers and their functionality, and while each is available on more than one platform, no single provider offers them all, despite the many advantages to advice professionals, end-investors, and providers in consolidating separate administration systems into one unified platform that delivers all investment products.
For providers, managing one system rather than many reduces the cost of ownership around infrastructure, upgrades, and regulatory change. With common back-office processes and procedures, similar workflows can be applied across the organisation irrespective of product wrapper, simplifying the work of back-office operational teams and creating greater opportunities for collaboration and cross-team working. This limits the number of partners involved in the supply chain and reducing the need for multiple integrations. Rather than attempting to merge data from disparate systems, extracting management information and delivering insights becomes much easier when handling a single data set, enabling a better understanding of behaviours and cross-selling opportunities.
For advisers and paraplanners, a unified platform allows the amalgamation of disparate policies, reducing administration, ongoing maintenance, and the total cost of ownership. A single platform provides familiarity and simplified navigation, resulting in less time wasted clicking through screens in search of information posted by different providers. It also creates a single client view with a consolidated digital output to meet concise reporting requirements more easily.
A unified platform provides greater flexibility when taking advantage of all available tax benefits and adapting the strategy as client requirements change. For instance, having the option in retirement to switch between different wrappers with the same provider makes it easier to accommodate shifting income needs over time. It means advisers can easily move between drawdown, guaranteed income products and non-pension wrapper accounts all with differing investment solutions, making the most of the client’s pension pot and the flexibility offered by pension freedoms without the need to use separate systems.
For investors, instead of having to keep track of different policies with various providers and deal with statements arriving at different times, a single platform ensures all investments are managed and can be viewed in the one place. By committing all assets within all products to a single platform, the adviser has greater power to negotiate on price and pass savings onto the client via lower fees.
There are regulatory, operational, and increased cost concerns to expanding the range of product wrappers available on platform, often focus is consumed on streamlining the provision of standard product wrapper types like ISA and SIPP. However, these operational challenges can be overcome by leveraging common processes aligned to existing product wrappers, with cost concerns addressed by utilising a technology platform that provides all the product wrappers within a single solution.
The technology exists, so offering the widest range of wrappers is a next logical step in the evolution of platforms, continuing to simplify administration for financial advisers, lowering servicing costs to investors and delivering a unified solution for all investment products.