In defence of the value of platforms
How the FCA will come to define value for money is still to be clarified, but it’s evident that platforms are about a lot more than price alone, says Alistair Wilson, head of retail platform strategy at Zurich UK Life.
With the FCA’s value for money review pending for the industry, it’s easy to question whether platforms are broken and in need of fixing. But while platforms may not be perfect, let’s not take them for granted.
You only need to glance back into the not-too-distant past to see how platforms have made it simpler for people to invest, enhanced price transparency and helped consumers access a far wider range of investment solutions.
Platforms have undoubtedly improved client outcomes by helping advisers to deliver new services, such as adviser-led model portfolios. They have simplified pricing structures, making it easy – perhaps for the first time – for consumers to understand the true cost of investing. And they have swept away the old slow-moving paper-based world.
How the FCA will come to define value for money is still to be clarified, but it’s evident that platforms are about a lot more than price alone.
It would be odd for any review to focus just on price, when the general trend has been reduced costs to investors for accessing platforms, especially over the last five years. Despite this fall in pricing, platforms have kept consumers at the fore by continuing to invest in new technology, increasing integration with adviser back office systems and perhaps most importantly, keeping pace with pension legislation. Platforms are also helping to keep the cost of investing down, with some managing to secure lower fund costs from a number of fund groups.
Value for money is invariably linked to cost but helping clients to understand and interpret what value for money means to them is arguably a more sound starting point for a review. No doubt the FCA will find it helpful to speak to consumers to see what they personally regard as good value for money.
This, of course, runs into the problem that ‘value for money’ means different things to different people, so the challenge for providers is to ensure they are clearly communicating to clients the real benefits of being on a platform.
Value for money is as much about ensuring people understand what their platform can actually do for them as it is about how much it will cost them. Gaining such an understanding will really help clients decide what is and what isn’t important to them on a platform, and ultimately what they see as value for money.
While the FCA is looking at value for money, there are other areas that could usefully be examined. It’s certainly worth assessing what can be done to make it easier for advisers and consumers to switch platforms when the need arises. As we’ve seen in the banking and energy industries, price alone isn’t a strong enough motivator to inspire people to move. Broadly speaking, consumers are looking for more than price to change supplier, as this on its own clearly doesn’t equal value.
Perhaps the FCA will also look at how the industry can be encouraged to collaborate more so as to keep fraudsters at bay and investors’ money secure. Consumers are bound to value this too.
So I am all for having a market study of platforms, with the clear aim of ultimately benefiting the client. Surely it’s about ensuring the client obtains good value for whatever price they pay.