THOUGHT LEADERSHIP
The challenge for retail investment platforms In a way , this is the challenge the regulator is laying at the door of retail investment platforms as part of the introduction of the FCA ’ s new Consumer Duty . Investment platforms have competed toe to toe over the last 10 years to embed themselves at the centre of the adviser ’ s tech stack , building strong and positive adviser partnerships while leaving the adviser to manage the end client relationship . But as Mike Barrett of The Lang Cat points out in a recent Citywire article1 , this is about to change as a result of the explicit requirement for platforms to ensure good outcomes for its customers . Some of these requirements can be easier to identify , such as whether a customer is getting good value or not , but many other areas could be far harder to judge and will obviously require the availability and analysis of good quality data . Take for example , customers who are taking regular withdrawals from their portfolios to sustain them in retirement . Will the platform need to have a view on how the adviser has structured the withdrawals and whether the scale of those withdrawals could lead to premature portfolio depletion , which most would consider to be a poor customer outcome I would suggest ? And what about if a customer outcome is ‘ less good ’ as a direct result of a lack of functionality or optionality from the platform itself ? Will it be expected to effectively whistle-blow on itself , or will that be a failing of the adviser and their platform due diligence process ?
So what ’ s missing ? I would argue that a good example of a lack of functionality and optionality when it comes to structuring portfolio withdrawals from a platform SIPP , would be an inability to incorporate all the potential income streams available , which should include guaranteed lifetime income . Innovative and forward-looking platforms such as Novia and 7IM have already partnered with Just to build this functionality into their propositions . As a wider understanding of this aspect of the Consumer Duty unfolds , I think many more platforms will follow suit . Some advisers will suggest that there is no demand from their clients – and therefore the platforms ’ customers – to have the ability to include guaranteed income as part of their overall retirement income mix . The platform management may well be happy with that feedback in terms of their commercial priorities and Consumer Duty responsibilities . But as mentioned by the ATEB Group in one of their blogs recently2 : The FCA in their ‘ Live and Local ’ events state that they see advisers using behavioural bias by asking customers leading questions to engineer the desired outcome .
This finding is borne out by research undertaken recently by Circero / Amo on behalf of our platform partner , 7IM . Of the retirees who participated :
• 75 % either agreed or strongly agreed that they would like some guaranteed income in retirement ;
• only 12 % of advisers agreed or strongly agreed that their clients wanted any form of guaranteed income . That ’ s a very revealing difference of opinion .
Enhancing outcomes with a guaranteed income-producing asset Research and analysis undertaken both internally and with independent external specialists , clearly shows that including a guaranteed income-producing asset , such as our Secure Lifetime Income ( SLI ) solution , can enhance customer outcomes across a wide variety of circumstances as part of a SIPP retirement income portfolio . We ’ re also working closely with a range of discretionary investment managers who have come to understand how including such an asset as SLI within their decumulation-focussed Managed Portfolio Services ( MPS ) provides better outcomes . So we believe platforms will increasingly have to review their development schedules as they balance user feedback with Consumer Duty responsibilities . I think it ’ s fair to say that the management teams at the independent platforms , who have spent years building deep and commercially worthwhile partnerships with advice firms , really don ’ t want to go anywhere near some of the issues I ’ ve raised . Consumer Duty will require them to know a lot more about their customers than they do currently , which could put considerable strain on their working relationships with their supporting advisers . It ’ s not clear yet how far platforms will need to go to show they ’ re ensuring customers are enjoying good outcomes when using their services . Clearly though , having competitive functionality and optionality will be key in helping their partners fulfil their Consumer Duty responsibilities too .
If you ’ d like to know more , we ’ d love to talk to you . Please get in touch with your usual Just contact , call 0345 302 2287 or email support @ wearejust . co . uk .
1 https :// citywire . com / new-model-adviser / news / platformsprepare-for-adviser-relationship-shift-under-consumer-duty / a2414804 ? re = 108283 & refea = 375377
2 https :// news . ateb-group . co . uk / gig-review
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