Finding the right platform can be hard for growth focused adviser firms as they look to fulfil a number of objectives, from supporting the firm as it expands to allowing the adviser to remain in the driving seat. 

It is all too common for providers to try to construct a one-size-fits-all proposition to serve a wide range of financial planning and wealth management firms with wildly differing models. Small wonder, then, that some larger or fast-growing firms are starting to push up against the edges of what’s on offer in the retail marketplace.

When developing a new platform, it is important the adviser firm knows what it wants to do and what it wants the provider to do. From there, both parties can start to work together to draw out the engagement terms and move towards implementation. Firms adopting this model are likely to already have a structured middle office process, dealing with client admin and reporting. 

As part of the implementation planning, the adviser firm will need to agree the optimum operational model for working with the provider. The challenge here is to ensure all the roles and responsibilities are clear, and where possible, the provider can support the advisory firm operating model. The day-to- day support, a governance and support model also needs to be agreed. 

Of course, firms at different stages of their evolution will require subtly different approaches. Here we consider four different types of advisory firms and how they might work with the provider to develop an effective solution.

1. Firms requiring a lower-cost platform solution that recognises their scale and ability to put their own proposition together.

There are a number of solutions on the market that allow advisers to construct a more cost-effective solution for clients. Here, the firm becomes the platform operator, and controls the level of client charging. Depending on the balance of initial and ongoing revenue for the provider, asset flows, levels and complexity, the platform charge can be significantly lower than industry averages. This allows advisers to either derive some additional margin, or pass the benefit onto clients (or both!).

2. Firms needing tighter integration from their front office to middle and back to improve efficiency.

In this model, the provider behaves more like a set of services than a platform (such as custody, dealing and administration) – which advisers access through a user portal. The portal can be one that firms develop or buy in, or one the provider supplies. Because the fundamental building block is a set of services, rather than a retail in-a-box platform, integration is part of the core capability of the setup. While moving to this type of model requires some work, it gives advisers better overall control of their end process and client value proposition including brand, price, client experience, etc.

3. Firms looking to build underlying value in their business to ensure they are in control of the outcomes their clients experience.

This model can provide a win/win, where the firm can generate additional revenue and still provide a more cost-effective and compelling service to their clients. In addition, the adviser firm gains control of the direction, implementation and charging of the full proposition. There are, however additional roles, with associated costs, that the firm will need to take on in order to adopt this model. 

The additional roles and responsibilities centre around the need for the advisory firm to take on the role of the platform operator. Firms going down this road will need to have functions in place for middle office administration (most providers can do some of this, but adviser firms will still need to ensure they have a strong handle on what’s going on), oversight, adviser support, and enhanced permissions by the Financial Conduct Authority. Costs for creating and running these functions will vary from firm to firm, and there are a number of different ways the model can be implemented. Existing firms will typically charge around 2 to 5bps to cover these costs.

4. Firms needing different services for different parts of their client book, without destroying efficiency or introducing risk.

Technology is a key enabler here. Offering a client portal that enables the client to access documentation, valuations, and light touch transactions (ISA top up, etc.) is an objective for many firms, and there are a number of solutions available in the market, although it’s worth noting a number of the traditional retail platforms are lagging behind in this space. 

For a lot of adviser firms we’ve talked to, the light touch nature of the services they want to offer to these clients means that to be as cost effective as possible, they need to be fully integrated to offer a seamless client experience and efficient process for the adviser. 

It is essential advisers feel able to work closely with providers that have both the appetite and capacity to devise a complete end-to-end system that fits their needs and growth aspirations going forward.