Adviser only platforms

There was an interesting FOS case reported recently. The client had a pension portfolio invested via a platform before engaging with a new adviser firm for ongoing advice. The client told the adviser that he wanted to make certain investments himself.

As is often the case when an adviser engages with a new client, the client was advised to change platform and the funds were duly transferred to a different platform. All was well until the client contacted the new platform a few weeks later in order to initiate some investments, only to be told that the platform was, “… only able to provide a trading facility by transferring him to its direct to consumer service …”.

He duly contacted the adviser so that the desired investments could be made and was told that if he transferred to the direct to consumer platform that would sever the relationship with the adviser firm as they would not be able to make any trades or complete applications on the client’s behalf.

Despite this, the client switched platforms and complained to the firm that its advice to switch to the adviser only platform in the first place had not taken due account of his clearly stated desire to make his own investment decisions. The FOS agreed and ordered the firm to compensate the client for losses incurred by the original switch and an additional amount for upset and to cover the cost of any further advice he required in order to remedy the position.

There are good reasons why some operators provide an adviser only platform and not all provide a D2C version in addition. 

However, firms should consider whether recommending an adviser only platform satisfies TCF outcomes 4 and, especially 6.

  • Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.
  • Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Of course not many clients will want to be able to trade themselves without input from an adviser but a similar issue can and does arise when a client decides to terminate the relationship with the adviser, or vice versa, for whatever reason. In the past, such clients have found themselves locked in to a platform that they either cannot do anything with, or in some cases that they are asked to leave or to go through the hassle of switching to a D2C platform with the same, or a different, operator.

New rules relating to switching platforms will come into play on 31 July 2020. You can read about those here: Making transfers simpler – feedback to CP19/12 and final rules. The new requirements might ease the adviser only platform issue to some degree but we believe that firms should still be considering the ‘what ifs’ of clients leaving or wanting to be more involved in trading when selecting platforms for clients.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

The delays and hassle that have bedevilled many clients wishing to switch platforms, and advisers recommending such switches, for years may be about to disappear with the new rules for platform operators.

However, we believe that factors such as client access in a number of scenarios should be every bit as important in selecting a platform as other factors like how easy it is for the firm to deal with that platform. After all, it’s the client’s money!

Action Required By You

  • Consider a wider range of factors when reviewing platform selection;
  • Ensure that the selection of platforms and products and their use with any particular client satisfies the requirements of PROD rules and TCF;
  • Contact your ATEB Consultant for further assistance with implementing PROD within the investment process.
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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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