Platform Due Diligence; A recurring theme….

Platform Due Diligence; what to do, how to do it and how often to do it. It crops up from time to time, with a bit of guidance here and there, but nothing concrete and no rules provided on what exactly needs doing.

The FCA then released the TR16/1 paper, essentially berating firms for not doing it well enough.

We already wrote a blog with some platform pointers here to help address this disparity:

However, we have continued to have requests from firms looking for more guidance as to what to include in their Due Diligence. Therefore, in addition to the points in the earlier blog, we would also suggest you consider:

• Make sure you know exactly what is important to your clients (ask them!) and not just what makes your life easier. The regulator wants to see the client impact while accepting that streamlining administration processes is a happy side effect.

• Consider the platforms technology, what it is using now, whether it has changed recently and whether it is likely to change soon.

• And make sure you consider the 9 key areas highlighted by the regulator in their original guidance, namely:

1. The platform provider
This includes reputation (industry awards, client feedback etc) and financial standing (including ratings and profitability)

2. Platform terms & conditions
In particular, what is the process if an adviser firm leaves a platform? Is there a notice period, issues with client ownership/contact or remuneration?

3. Charges
Core charges, as well as wrapper and transaction charges. Switching charges may have an impact, depending on the investment proposition. Also is family linking important?

4. Range of funds and wrappers
Range of tax wrappers in particular will impact how many different platforms are needed – and when off platform will be more suitable. How frequently are SIPPs, S32 and trust accounts used? Is the preferred investment proposition available?

5. Asset types
Is there a requirement for ETSs, investments trusts, structured products or direct equities? Again, down to client categories.

6. Platform functionality
It is important to determine firstly what functionality our firm and its clients’ need – and then whether the platform offers it. This can include withdrawals, paper based, adviser remuneration, client reporting, management information and any desire to white label.

7. Accessibility
What levels of access are required and does this need to be 24/7? Does the platform tie in with any DFMs you use and do clients need functionality?

8. Platform tools
Do you require any platform tools – or will these be managed off platform? Risk profiling, cashflow etc?

9. Support
What support do you need and how best do you receive it?

Speaking at the FE investment summit last year, Rory Percival of the FCA highlighted expectation on platform due diligence, stating “For platforms we would expect an impartial assessment of the options, taking into account the client bank circumstances, what services that you want to provide to those clients and which platform or platforms in the market best fit those services and those solutions that you want to deliver to those clients.

Going through that process, writing it down, doesn’t have to be war and peace – but what your thought processes are, and how you have come to the conclusion around your platform. That’s a professional approach – that demonstrates a mindset that’s got the client at the heart of the business, your doing the right thing for the client.”
If you are still struggling to articulate the research you have done, or to feel confident you have covered all areas, we will be launching something next week that will be able to help you. Watch this space!

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