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Segmenting your platforms to best fit each client’s financial journey

Advisers that fit the platforms they use directly to their clients’ financial life cycle can better serve each clients and meet regulatory requirements, Alastair Wilson, head of Retail Platform Strategy at Zurich, tells Rob Kingsbury

Adviser firms that segment their platforms, with a focus on which are best suited to certain types of clients and the solutions they require, are more likely to best serve their client needs and less likely to be accused of retro-fitting or status quo bias, suggests Alastair Wilson, head of Retail Platform Strategy at Zurich.

“Not all platform propositions are the same and those that were built to service the accumulation stage of financial planning may not be the best when it comes to the decumulation stage and ensuring a client receives a regular income” Wilson says. “Advisers and paraplanners have to search for what those differences are.

“Advisers have 10 years and more of using platforms under their belts. They know now which platforms give them best service or best support their proposition in certain areas,” he says. “Segmenting platforms into what they are good at, can help advisers re-evaluate the decisions they have taken in the past, recognising that they may not make the same decisions today, and driving that through their client bank, so everyone gets the platform that best suits where they are in their financial journey.”

This would also better fit the FCA’s view that rather than looking at the value of the client, advisers should be looking at where the client is on their individual financial journey.

“Advisers should be testing the assumption that a platform can take the client from cradle to grave,” Wilson says. “You’ve got to get under skin and get into the detail of what each platform can and can’t do.”

Core due diligence question

The one question that advisers are not asking in their due diligence on platforms which Wilson thinks is core, is how the platform can help the adviser firm improve its clients’ outcomes.

“Due diligence on platforms can be about the detail, the boxes that must be ticked, but it’s also about the planning strategy for clients, and about taking a step back and looking at the bigger picture in respect of the proposition offered by the adviser firm,” he says.

MiFID II, he points out, will require that advisers, fund managers and platforms know their target markets. “By default, that will require each to know what is not their target market.

“Bearing in mind the target market of your business, would you rather work with a platform that has thought through how it can help support your business and the clients you want to serve or a generalist platform that ticks all the right boxes but isn’t focused on your type of client?”

“If it was me asking the questions, as well as the necessary ones around funds, technology and capital adequacy, I would be asking platforms how they can support my client proposition. Where are the gaps in it and how would they help me fill them. We don’t get that type of holistic approach to questioning half as much as we should, in my opinion.”

Digging down into the detail is crucial, he says. “One question we get asked more and more is whether as a platform we pre-fund. This may seem a simple question and anyone who pre-funds will answer that they do. But there are a number of ways in which pre-funding works. The questions to ask then are what, why and how that pre-funding works.”

Platforms generally are not good at making that differentiation clear in due diligence work, he adds.

“Platforms can’t be one size fits all and if you are clear on your target market then you need to shout it from the rooftops. For example, we only take advised clients and most are goal driven but those goals will change as people go through life. Where we see we offer something more is to the at-retirement market.”

Current and future challenges

As an example of that focus, he cites the example of clients who are dependent on their income from the platform. “If the platform you are using has all the bells and whistles but if something goes wrong – because of a market change or whilst the platform is sorting its technology out – and your clients don’t get paid, who are they going to call? It’s about us as a platform putting ourselves in the clients’ shoes and their expectations of the adviser firm.

“Advisers might have 100 clients today who need income. In five years’ time that could be 500. It’s even more important that the platform can ensure all those clients get paid the income they need, when they need it.”

A major challenge when it comes to income planning is where clients don’t know how much income they might need, Wilson adds. “We provide example scenarios which show how much a typical person spends when they are 65 or 70 or 80. It’s a starting point for a discussion with the client.

“Likewise with drawdown. No-one knows what lies ahead and in some cases a client may already be showing signs of ill-health. We’ve recognised that advisers would probably like the option to build in protection benefits for five years so if the client were to die in that period the capital value would have some protection.”

Ultimately, it’s about how an adviser firm would use the platform proposition to build on and improve its own proposition to its own clients, he says.

“I think the challenge is that people often see platforms as trading instruments but they are far more than that and that is what advisers have to dig down into, so they know the platform’s proposition aligns with the adviser firm’s proposition and its clients’ needs and wants.”

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