Platform financial strength is a growing priority for advisers, according to the latest Scottish Widows Investor Confidence Barometer. In its annual survey, Scottish Widows asked advisers what the top issues were that came up in due diligence checks, which need to be carried out to comply with the Financial Conduct Authority’s Consumer Duty rules.
Service (52%) unsurprisingly continues to top the table, with value for money (46%) listed almost as frequently as price (47%). Financial strength (35%) was cited by more than a third of advisers, ahead of other factors like digital functionality (14%).
In a further indication that financial strength is weighing heavier on advisers’ minds, four in ten (41%) surveyed advisers reported that they would exclude a platform from their shortlist if it had a ‘B minus’ financial strength rating or lower. Nearly half (47%*) of surveyed advisers worried that a platform could financially fail within the next three years.
Advised clients are also much more informed about the financial strength of the providers they use. While a strong majority (62%) of advised consumers stated that they know the rating of their platform/provider, just over a third (35%) of non-advised consumers reported the same.
An oversupplied platform market?
Advisers are split over whether the platform market is oversupplied: 40% agree that it is, and 39% disagree. With a polarised view on the state of the market, it’s unsurprising that half (51%) of advisers have strategies in place to protect client money beyond the £85,000 Financial Services Compensations Scheme (FSCS) limit.
The research additionally shows that when it comes to protecting their assets, advised consumers are in a better position than non-advised. Three-quarters (74%) of advised consumers reported that they have strategies in place to protect their money above the FSCS limit compared to only 60% of non-advised consumers.
While a significant proportion of advisers fear the financial collapse of a platform in the next three years, there is division among advisers over the benefits of merger and acquisition activity in the sector. Just over half (52%**) of advisers disagree that ‘consolidation and M&A in the advice industry is a good thing for consumers. The picture is more muddied when it comes to private equity ownership, which has had a growing share of the advice market in recent years. More than one in three advisers (37%***) surveyed are concerned about private equity market share, with a further 43% uncertain. One in five (20%) said they were not concerned.
| Ross Easton, Head of Platform Proposition, Scottish Widows Platform, said: |
| “It should come as no surprise that the financial strength of platforms is a top priority for advisers, as it’s the pillar on which their business is based, and trust is formed with clients. This is also in line with the expanded mandate for assessing foreseeable harm from the FCA to ensure client money is protected. Advised consumers are increasingly engaging with their providers and demanding the strongest assurances that their money is safe. “Financial strength also impacts a platform’s ability to invest, with the advice market now expecting continuous innovation to keep up with intense competition. We’re continuing to roll out our £150 million investment programme, working behind the scenes on enhancing our technology to give advisers everything they need digitally in this rapidly evolving market.” |
