The merits of a deeper dive into platform functionality

In a world where investment platforms are packed with ever-expanding features, are advisers and clients making the most of the tools at their fingertips, or simply navigating unnecessary complexity?

In her latest column for IFA Magazine, regular contributor Novia Global’s Linda Johnstone explores why taking a closer look under the bonnet of platform functionality can reveal the difference between innovation and inefficiency for advisers.

I got a new car earlier this year. Even now, after several months of ownership, I occasionally realise I have precious little idea of what it can actually do.

I know it can get me from A to B. I know it has a decent turn of speed. I know it is nice and comfortable. I know the kids like it, mostly because of the LED lighting around the interior. But in terms of its wider functionality – the buttons, the “infotainment” system, the bells and whistles – I reckon I still have a lot to learn.

I should stress at this point that this is not a “woman thing”. My other half also veers between bewilderment and surprise. I am sure consumers of all types are nowadays familiar with this sort of voyage of discovery.

For example, can you honestly say you use each and every app on your smartphone? Are you even remotely aware of the purpose lurking behind some of those icons? I would dare to suggest at least half of the available functions never get a look-in.

Importantly, I would also dare to suggest much the same often applies to investment platforms. Many users can sail through their financial lives without ever truly appreciating the full breadth of the capabilities at their disposal.

In the current climate, with heightened political and economic uncertainty testing markets, investors are likely to check their portfolios more regularly than usual. This presents a great opportunity for them to get to grips with the technology that underpins their investment journeys.

But what should they hope to find? And is it conceivable, as may be the case with my car, that many of the hidden depths they uncover were never worth revealing in the first place?

When peeling back the layers makes you want to cry

We should perhaps begin by considering what investors should hope not to find. In many instances, unfortunately, this is precisely what a deeper dive is likely tolay bare.

What can gradually emerge, to put it bluntly, is a mess. There is a sense that nothing quite matches. It is as if everything has been thrown together. Some functions seem to be afterthoughts, while other appear practically redundant.

This is the stuff of legacy infrastructure – an unhappy jumble of barely compatible features from yesteryear. What might at first appear to be an impressive array of resources is soon exposed as an assortment of inefficiencies that serve only to breed confusion and frustration.

The problem lies in the race to remain at or near the cutting edge. The starting gun was arguably fired over a decade ago, when the Retail Distribution Review triggered a marked increase in advisers’ use of outsourced investment solutions. The scramble to incorporate state-of-the-art tech has left many platforms with patchwork systems characterised by ill-matched components and temporary fixes.

It is rather like learning your new car is saddled with a satnav from the mid-2000s or one of the last CD players ever made. With the best will in the word, such anachronisms are no longer fit for purpose.

It is also possible, of course, for some elements to be ahead of their time. The danger here is that these “innovations” have been insufficiently tested and turn out to be overly complex or perilously unreliable – or both.

The rampant use of “black box” AI may fall into this camp. Like drivers, investors are unlikely to feel entirely at ease if they have grounds to believe they are not in complete control of what is going on.

Uncovering a firm focus on what really counts

Ideally, a deeper dive into a platform should find a level of functionality that reflects continued, effective adaptation. In tandem, maybe most significantly, it should find a clear focus on what matters.

There are arguably two questions that investors and their advisers should ask as they peel back the layers. The first: does this really work? The second: is this genuinely useful?

The former relates to the issues already discussed. The latter relates to a tendency to load all kinds of devices with functions that, when all is said and done, are of strictly limited utility.

This goes a long way towards explaining why I have still barely scratched the surface of my new car’s list of purported attractions. The reality is that a substantial number of them are of neither use nor interest to me. It could well be that I can receive a seat massage while an onboard computer obligingly reverses into a parking spot for me – but so what?

Similarly, a big reason why we ignore so many of our smartphone apps is that they are at best obscure and at worst virtually pointless. Do we really need a grass-growing simulator or a random excuse generator to hand at all times?

Ultimately, the fundamental task of a car is to convey us from one place to another. The fundamental task of a phone is to facilitate communication. So what is the fundamental task of a platform?

I would say it is to look after people’s money, protect it, grow it and give it back. Investors who discover ever more evidence of a platform’s commitment to this cause may conclude they have chosen wisely.

Linda Johnstone is Novia Global’s Head of Investment Proposition.