Novia says battle for platform margins is hitting users

Platforms/wraps' margins will continue to be squeezed in an ever diminishing circle. The more these services seek to streamline the greater the demand from users will be to reduce costs. Platforms will be at greater risk as they will not be able to provide the additional investment choice demanded by clients or even required by the Regulator (FSA or its successor).

As an adviser firm we will continue to aggregate/consildate clients investments on wraps where appropriate, new clients will be directed towards wrap as the preferred option as this will ultimately reduce client costs, reduce the administrative burden for both adviser and client and increase the reporting capabilities for investments held. But we will demand competitive pricing as our workload increases.

It's not just about current charges but also about sustainability. In the battle for market share, some of the deeper pocketed providers are willing to take on huge losses or endure nil return on shareholder capital (have a look at Cofunds accounts over the years to see what I mean) in order to grab market share and even possibly drive out some competitors. Proper due diligence by advisers will uncover these - do you support cheap but not sustainable? What do you tell the client? Surely it is better to support that which is sustainable in the first place?

This is self forefilling as Platforms are just another layer between the clients money and the ultimate asset that the client investment is within.

The challenge for advisers as we go towards RDR and beyound is to get clients partcipation and entry at the right stage of the value chain.

The retail end is unfortunatly not the value end if several layers of charge apply along the route. RDR is talking about adviser charge being removed and explicit. Other will need to follow, this includes the Platforms, Fund Groups, Underlying fund manger dealing etc. Stockbrokers, right the way through to the naked investment in the underlying asset. It is a shame that the FSA so fit to allow old style platforms to retain rebates ( This is a commission from the fund group which ever way you cut it)

Novia was at least along the route of transparancy of its cost in the value chain. Not sure what the plans are following the platform paper as they have been quite on this. Best of luck though Bill.

The FSA needs to be clear as if as an adviser that is to remain independent of the product solution or provider, my duty will be to use a back office system as the consolidator of assets and it will be my duty of care to see if my clients collectively have the buying and syndicate power to get as near to the creation end of the value chain.

This may mean only purchasing at institutional class or rates for a collective.

I would expect my professional bodies and trade associations to help me form syndicates with outher Independents to push this further and not purchase the off the shelf collective but get right to the source.

This is the challenge going forward if we play the current game.