Platform and wrap due diligence – dull but necessary?

Megaphone Dude

‘Begin with the end in mind’ may sound like management speak but is pertinent when it comes to choosing technology to support your client proposition and a ‘home’ upon which to hold your client’s invested assets. But where do you start?

Everyone loves a multiple choice quiz. Question: what does your current platform due diligence documentation look like?

A. It’s a document from my platform/wrap provider

B. It’s a file full of FSA factsheets plus a document from my platform provider

C. Something else altogether

If any of the above applies to you, then read on!

Your answer might be ‘C’ – but what does good due diligence actually need to consist of and look like? Most importantly, how do you go about it?

Perhaps a mobile phone device analogy will be helpful. Think about when you bought your mobile phone. Did you leave the shop, device in hand or already to your ear and then, six months later, go back and ask for the documentation? Unlikely.

Like me, you probably thought about how much you typically spend on the phone (loads) and how much you are likely to text (loads). Whether you will take it abroad (hopefully, at least annually) and then whether you need multiple features or applications on the handset. What about those you might not need – but just have to have?

Taking these requirements, the helpful person at the phone store would have explored a range of options and tariffs, and then helped you to select not necessarily the cheapest option or the device with the most gadgets, but the one that would deliver the services you require and enable you to run your life better.

To quote that annoying meerkat: ‘simples’.

Was your wrap platform selection done in a similar way – based on the requirements to deliver your client service and investment proposition? A review of the range of options available, and then your selection process, with the outcome fully documented?

Perhaps yes – but equally perhaps not!

A good starting point is the FSA Factsheet (Platforms: using fund supermarkets and wraps)* which lists 9 elements to consider regarding your platform. As a quick reminder these are:

  1. The platform provider
  2. Terms and Conditions of using the platform
  3. Charges – including actual cost, charging structure and transparency of charges
  4. Range of funds/ tax wrappers and other products available
  5. Range of asset classes
  6. Functionality
  7. Accessibility
  8. Additional tools
  9. Support services

A lot of headings, that’s for sure. But what questions should you really be asking and then how should you, and your firm, start comparing and contrasting the wide range of options available to you?

At the IFP Accredited Firms Conference earlier this month, I hosted several round table discussions with Financial Planners. The key questions raised in this area were:

  • How do I ensure cultural fit with my business?
  • How do I know it’s really clean? (The assumption being….)
  • To what extent should I move clients based on charges?
  • How do I know my provider is likely to survive?
  • With >35 platforms to choose from, where do I start?
  • Is the wrap provider from 3 years ago still appropriate for us and our clients?

This is important stuff. No wrap platform provider offers a free cuddly toy meerkat for choosing their solution. Yet, there’s a lot more to this than first meets the eye.

Watch this space for Chapter 2…

In the interim, if you would like to discuss your wrap due diligence process, please get in touch.

*FSA factsheet for Financial Advisers, Platforms: using fund supermarkets and wraps – SFDFS019 07/11

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