What advisers want from investment platforms

Investment platforms have gone through a spiral of various evolutions over the last decade…is proving harder to come by.

We believe in the value of financial advice, and our investment platforms place financial advisers at the heart of it. Partnering with our financial advisers for the long term is what sets us apart. We make it personal for advisers, and their clients.

Generally referred to as LISPs, investment platforms are now officially known as Category III Administrative Financial Services Providers that are governed by the Financial Advisory and Intermediary Services Act (Fais)…Greensheet Retail wealth industry in South Africa remains largely intermediated, with less than 12% of investments placed on investment platforms directly, ie being invested by clients who transact digitally themselves or clients who make use of a digital advice solution like a robo adviser.

The needs of financial advisers and the trends shaping advice models in South Africa and globally, therefore, remain a key driver of business strategies of investment platforms…delivery to advisers. Our role is to continually invest and optimise our platform through technology innovation to ensure that advisers can increasingly remove the burden of administration from their daily operations.

The fundamentals for a successful platform include the following:

• Offering a world-class service experience that meets not only the requirements of advisers but also of clients.
• Superior technology – in a digital world the security and safety of the system, and protection of information, are some of the non-negotiables.
• Easy-to-use business processes that can easily be adopted.
• Digitally enabled processes to keep up with the general technological advancements forced by other industries, like smart devices.
• Demonstrable innovation and thought leadership in its product offering.
• The ability to bring the investments ecosystem into a one-stop-shop – some call this a supermarket for investments. We feel it is more about making sure you do the things to best partner with advisers and then do it exceptionally well.

I think it is fair to unpack one point in particular in more detail – successful platforms provide a comprehensive suite of capabilities for financial advisers to customise solutions for their clients’ specific investment needs…today, successful platforms play a key role across the entire investment industry’s value chain.

Many advisers are moving away from using a broad range of unit trusts and exchange-traded funds to a narrower set of solutions to meet client needs. The preference for solutions has resulted in the increasingly important role of discretionary fund managers (DFMs)…efficient administration and reporting of model portfolios.

Although platform fundamentals such as offering market-leading access, choice and seamless switching between investment components, facilitating transactions, consolidated and transparent reporting for clients, ease of use enabled by technology, eradication of duplication of work between adviser’s offices and their own, are essential. These are no longer distinct differentiators. Advisers now compare platforms on how well they play holistically across the various parts of the industry.

If we look at the trends dominating the local landscape, many typically following the UK, we note the following key points:

• Platforms are seen as aggregators.
• They are seen as the admin play for advisers to help ‘shift the paperwork’ so that they can focus on giving advice and creating value for their clients.
• Fee downward pressure through efficiencies of scale are marring the longevity of platforms and consolidation will follow.
• Regulatory forces continually move the yardstick to which platforms are measured.
• Ease of doing business – the platform with the simplest capabilities are the frontrunners.

Again, we can single out one key aspect, namely fees. Due to the vast array of services performed by a platform, what fee is appropriate or fair for both the platform and the client? Here equalisation was certainly an agenda point of the recently introduced Treating Customers Fairly regulation. The regulation brought industry benchmark pricing levels to more appropriate levels, underpinned with transparency to easily compare fees between different product providers.

Naturally, the question remains: what is a sustainable level of fees, given the continued need for the depth of functions currently performed by platforms, especially if UK trends, which include even further downward pressure on fees, are to be expected?

There is certainly a lot more to platforms than just the administration layer.

As we build our platform of the future, we at Momentum Wealth are placing our financial advisers at the core of our design. It is our commitment to make sure that by choosing us, advisers will experience a trusted and personal partnership for the long term.

Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider and part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).