Platforms failing to satisfy users' service expectations, new survey suggests

Financial research company Defaqto said that 21% of platform users had switched provider during 2011. Defaqto surveyed 345 platform users and found that financial advisers think that platforms are not delivering on the expected levels of service in nine of the top 10 "most important ... service satisfaction disciplines".

Service failings occur in areas to do with the ease of doing business, keeping promises and treating advisers and consumers fairly, maintaining "robust and reliable" systems and in "efficiently" transferring investors' existing portfolios onto the platform, it said.

The financial advisers surveyed also raised concerns with platforms' timeliness in processing activities, the competence of providers' staff to "understand and deal with" their problems, and the staff's "willingness to take responsibility for resolving issues and problems". In addition, the advisers outlined that platforms had fallen short of their expectations in their "effectiveness" in communicating problems with transactions, as well as with the "speed of response and action taken" in dealing with enquiries.

The survey revealed that the cost of using a platform was a "distant third" behind platforms' flexibility and service as the "major push factors for switching", according to Defaqto. The research company said that platform providers have been focused on "asset accumulation" in the build-up to the Retail Distribution Review (RDR), but that those companies need to deliver on service expectations if they want to retain business in the market.

Platforms are online services that allow financial advisers to manage their clients' investment portfolios. Some platforms can be used by customers directly.

"By placing a stronger emphasis on quality of service and meeting user expectations in the areas advisers feel to be most important, long-term relationships that are conducive to ‘sticky’ business can be formed post-RDR," Defaqto said in a summary of its 2012 platforms report. "While the platforms industry is run on technology, the majority of the financial services industry is built on relationships. The importance of delivering quality service to customers should not be underestimated. The final decision on retention or adoption will almost certainly be down to the relationship between the adviser and the platform operator."

The value of assets managed via investment platforms has doubled from £100 billion in 2010 to £200bn in 2012, Defaqto said. The research company's insight analyst for funds, Fraser Donaldson, said that despite the growth, platforms should respond to the needs of existing users.

"Platforms are in a golden period of growth due to advances in technology and the RDR acting as a catalyst for adoption, so it is understandable that the current focus is very clearly on asset accumulation," Donaldson said. "However, providers will need to give consideration to all aspects of their propositions in order to ensure they retain existing business as well as acquire new business."

“With RDR implementation fast approaching, advisers will not be hesitant to move to a new platform provider if this ensures greater suitability for their clients and their business in the new distribution landscape. Platform operators do not want to lose adviser clients to a competitor, as profitability is very hard to achieve in this market. It is therefore crucial that the platform operator understands and acts on the needs of the adviser and their clients."

Major changes to the regulation of the retail investment market are set to come into effect from the end of this year, following a review of the industry by the UK's Financial Services Authority (FSA).

The City watchdog has identified problems with the way that financial advisers, investment fund managers, financial product providers and platform providers interact in the market. It has set new rules on the way the market players can be paid for their services in a bid to remove product or provider "bias" and deliver greater transparency over charges consumers face when using platforms.

The FSA has outlined plans to delay the introduction of new rules affecting platform providers specifically for another year after admitting that it would be "helpful" for it to "resolve" some questions it had received from platform providers about "operational aspects" of the new rules.

The new rules force investment advisers to "take reasonable steps" to ensure that their choice of platform does not bias their selection of products for consumers. Platforms are also 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."

The rules mean that a firm making a personal recommendation to a retail client in the UK to invest in a retail investment product will no longer be permitted to receive a commission set by the product provider. Instead, the firm will be paid an adviser charge agreed with the client in advance, under other new rules stemming from the RDR.