Fundscape said that platforms that operate a "fee-based model" have attracted financial advisers to manage client portfolios via their services, indicating that planned changes to the regulation of platforms is impacting on the way the market will work.
Fundscape said that 'wrap' platforms had experienced better sales growth in the second quarter of this year than more "traditional" fund platforms as a result of advisers switching their business to them.
"The transition to a fee-based model is driving adviser firms to wraps’ doors," Bella Caridade-Ferreira, director of Fundscape, said in a statement. "As a result, the wrap cohort is outperforming traditional fund platforms in growth terms."
Fundscape said that Cofunds was the top platform provider in terms of both gross and net sales during the period of April to June this year, but that the biggest growth in the market had come from 'wraps'. It said Standard Life and Axa Elevate had placed third and fourth respectively in sales terms ahead of "more mature fund platforms". This was despite wraps experiencing "stickier" business conditions, Caridade-Ferreira said.
Platforms are online services that allow financial advisers to manage their clients' investment portfolios. Some platforms can be used by customers directly.
Earlier this year City watchdog the Financial Services Authority (FSA) proposed new rules over the way platform providers can be paid.
"The way in which the consumer currently pays for the platform service hinders transparency and has the potential to negatively affect competition in the market," the FSA said in its consultation document. "In line with the changes introduced on adviser charging in the Retail Distribution Review (RDR), we do not feel that product providers should be able to 'buy' distribution."
"To ensure the consumer is clear on the cost of the platform, we believe the consumer should pay an explicit fee for the platform service, and payments from product providers to platforms should be banned. This ban would affect both the advised platforms market and non-advised (direct to consumer) platforms that allow consumers to invest directly in retail investment products" it said.
Currently complicated arrangements can be formed between financial advisers, product providers, fund managers and investment platform providers over the management of consumer investments and how charges are levied and paid for. In 2010 the FSA published plans to make the processes involved clearer with the aim of eliminating 'product bias' in the market.
Among the problems identified by the FSA has been the issue of 'product bias' where platform providers receive commission for promoting certain financial products to consumers, or advisers on behalf of their clients. However, problems around 'product bias' have also been identified in the relationship between product providers and advisers. The problem exists where some advisers are paid commission by product providers to promote to their clients, or invest in them on their behalf, certain financial products that the provider offers.
Changes to the regulation of the retail investment market are due to come into force at the end of this year, although the FSA has proposed giving platforms until the end of 2013 before they would have to comply with most of the rules governing their operation. Under the rules investment advisers must "take reasonable steps" to ensure that their choice of platform does not bias their selection of products for consumers.
The regulator has outlined plans to ban product providers from issuing cash rebates to consumers' investment accounts. Firms have used the rebates to offset the costs faced by consumers in paying the adviser charge. Under the FSA's plans consumers would still be able to receive rebates by way of additional units which the customer may decide to reinvest into the same or different funds.
Platforms will also be required to present their products in an "unbiased manner" and they must also "meet the same standards as product providers when they facilitate adviser charging." Platforms are also required to "disclose any fees or commission offered to them by third parties in advance of providing a service to customers."
