Platforms  

Platform View: Suitable investment options

I go to M&S not just to buy my lunch, but also to buy my tights and even items from its new range of women’s wear. I don’t think that because M&S knows about tights that don’t ladder easily that it cannot also be a good place for a sandwich.

Are platforms and investment solutions so different?

Obviously, financial services is a widely different market with a different regulator than that which M&S has to deal with, but why is there so much concern about a platform providing both a suitable platform alongside a market leading a set of investment solutions?

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Can a platform be your and your client’s administration and engagement engine along with providing your investment solution? The short answer is yes, but there are key considerations:

There has to be the ability for both the platform and the investment solution to stand on their own. I would not buy tights that ladder just because I buy my sandwich at M&S, so why would I buy funds from a platform just because the funds are easier to acquire?

The value, and hence price, has to be relevant for both the platform and the investment solution and there should be no cross-subsidisation. As the regulator has set out, there can be no cross-subsidisation between a platform and the investments acquired on the platform. This makes complete sense – do I get my sandwich cheaper because I buy my tights at M&S?

There is also the question of client suitability. Does the platform and the fund choice meet my needs and goals?

There are many platforms in the market that are fiercely independent and focus on being solely a platform. Many do this well by focusing on their strength, which is platform administration. Other platforms are run by companies that have wider strengths than solely platform administration, they also have a skill set in investment solutions, such as a fund range or model portfolios.

There have been various debates in the industry about the ability of one provider to provide both. Just like M&S can sell me tights and a sandwich if there is expertise to do both and client suitability is met, then one provider can successfully achieve both.

The regulator constantly reminds us of the need for client suitability. If one provider can service both a client’s platform and investment needs, this is not a cause for concern as long as the client is not shoehorned into an end-to-end proposition that does not meet their needs.

7IM started life as an asset manager targeting a specific type of client and has expanded to cover multi-asset product ranges managed for different levels of risk, but now has full discretionary services and a range of model portfolios.

We have innovated with a range of smart passive funds with the objective to gain benefits of active management for the cost of passive management. Just like sheer tights, these solutions are not suitable for everyone and should be engaged after suitability is established.