Challenge your platform

Who better to herd kittens than the lang cat, suggests Alistair Wilson 

Early in 2016, following on from the implementation of pension freedoms a year earlier (it feels longer, doesn’t it?) we commissioned the production of an independent review of 14 adviser-led platforms by Edinburgh-based platform consultancy the lang cat.
It can be a bit of a maze out there, so we were looking to better understand, and to share, how well or otherwise platforms were supporting advisers and their clients with the delivery of income and withdrawals, with a particular emphasis on retirement.
The fact is that platforms are major custodians of client money, with recent figures from Platforum showing pensions as the single largest contributor to platform assets in 2016.
With more than half (54.7%) of platform assets being held in pension wrappers and 82% of net new sales going into pensions (up from 70% a year ago), we thought it was worth having another delve into the market.
For the second year running, the lang cat has conducted an analysis of how well platforms are performing at delivering income to clients in the new retirement landscape. It would have been a bit dull just to carry out an exact repeat of last year, so there is even more this year.

KEY FINDINGS

This latest review aims to help advisers to navigate some important areas of financial planning.
They may be surprised by some of the findings, especially when considering simple aspects that matter quite a lot to clients, bearing in mind of course that clients probably aren’t looking for really complex stuff.
For example, some clients may expect to be able to set the exact date when they will be paid their income each month. But as the chart that’s not the case.

Or, in these heady days of high technology, why does it seem to take an inordinate amount of time for money to arrive in a client’s bank account after they request a withdrawal?

Is it better to depend upon technology to deliver client money, rather than relying on adviser firms to check there is sufficient cash available to pay it? As the chart shows, platforms take different approaches to cash management.

ASKING QUESTIONS

Asking the right questions of platforms takes on a whole new meaning, and advisers need to ensure they are revisiting this with their preferred platforms so there are no hidden surprises for them or their clients when it comes to giving clients their money back.
The lang cat also talks advisers through some challenging questions that could be posed of platforms to beef up their own due diligence. There are almost 60 questions within the document, sectioned off under different client needs so they don’t all have to be used.
Some of the questions being suggested may come as a bit of a surprise, but you may be even more surprised by a particular platform’s response. It’s important to be prepared, with no shocks or blows and all that.
It is not unreasonable for clients to expect that a lot of the grunt work has already been undertaken regarding what is and what is not suitable. When looking to run income strategies, keeping it simple could be important, so these questions for platforms look eminently sensible:

Q Must all pension assets be sold down in order to make a tax-free cash payment?

Q When changing the regular income up or down, are there ever any circumstances where either a paper application or wet signature is required? 

REASSESSMENT

With the amounts invested onto platforms each month running into the millions of pounds, advisers need to ensure they have done their homework about which platform suits each client best – or it may be that advisers need to revisit previous decisions. These may no longer be quite as robust or suitable, so at the very least need to be reassessed. Market commentators have reflected that there appears to be no let up on the use of platforms, and investors are likely to remain invested on platforms for longer than was perhaps originally expected. Deciding which platform or platforms best suit client needs when decumulating (terrible word) is crucial, given that investors and advisers could be chasing and managing income for more than 20 years. We could have carried out some of this research for ourselves, but where’s the fun in that? Having this researched and written independently of any platform is far stronger and should carry considerably more weight for platforms and advisers.
Given the level of detail provided, we believe ‘A Sentimental Journey? Retirement Income Withdrawal Through Platforms’ is an invaluable guide for everyone.

Alistair Wilson is head of retail platform strategy at Zurich