The platform industry may be presenting independent financial advisers (IFAs) with solutions that are cheaper but as a consequence, are heavily restricting and limiting the choice they and their clients require.
“Independent advisers are under the pump to try to keep their fees low but the products that are being put out to them, in order to get the platform price low, are reducing the choice that’s available to those independent advisers,” Powerwrap chief executive Cormac Heffernan told InvestorDaily.
“So what they’re being forced to do is choose between a cheap platform [with limited choice] and a really expensive platform that has choice. It’s a poor deal for IFAs.”
The ability to offer advisers, particularly IFAs, a broad range of managed funds is essential in the current environment of business model reassessment and Future of Financial Advice measures, Heffernan said.
“If you’re a bank adviser, expect that your platform is going to be full of vertical integration but as long as they disclose to client that they’re getting the very best of a limited choice, that’s fine,” he said.
“If you’re an IFA and you’re using a bank-aligned platform, you’re really getting the worst of both worlds because you’re not getting your salary from the bank and you’re only offering exactly the same as what the bank advisers are doing.
“Independent advisers shouldn’t feel that they have to compromise choice in order to give value to their clients, which is the story that they’re being fed but they shouldn’t accept it.”
As a comparison, Powerwrap’s SMARTwrap Investment Account has still come in cheaper than restricted choice platforms available in the market, Heffernan said.
“IFAs should expect this and I think they’ve been let down to date,” he said.
SMARTwrap, which offers access to over 200 managed funds, has a further 1100 funds available that was growing by the week, Heffernan said.
“We’re a supermarket and you choose what you want to choose. We’re not trying to restrict that choice,” he said.
“Mostly that choice is restricted for one of two reasons: it’s a benefit to the platform to restrict it to [aligned] funds or else they’re offering third-party funds but charging for it or making it very difficult to get onto the platform.”
Last week, Powerwrap announced that its clients can now access SMA functionality, which was of a similar to BlackRock’s SMA.
Heffernan said while other platforms now provide SMAs, they again, offered a limited choice to IFAs.
