Yet within its five predictions for the 2013 platform landscape the firm said it expects the execution only market to boom, with a number of new entrants in this space powered by existing platforms.
If this is true it represents a tightrope for platform providers to navigate given the majority of their revenue comes from advisers, which also account for, in many cases, their entire existing client bank.
Platforms will need to be careful not to alienate or indeed aggravate advisers by treading on their toes. But setting up a direct to client or execution only service could do just that.
Hedging bets
In a way Fundsnetwork has done this pretty successfully already, it is one of the few platform providers to have an offering for both private investors and intermediaries, with most other platforms thus far plumping to specialise in servicing one or the other.
A consolidation in the platform market has long-been predicted and changes enforced by RDR could well accelerate such a trend.
This means as platforms battle for a share of tightening margins it would make sense for them to try and broaden their appeal.
On the part of the platforms, they are sure to argue that execution only targets a different type of investor than those who seek financial advice and could go some way to filling any ‘advice gap’ left by the introduction of upfront fees.
It is hard to believe, however, that all the investors currently using Hargreaves Lansdown or buying funds through FundsNetwork without advice are £50 per month ISA savers and anyone with significant investable assets is by definition a potential advisory client.
Powerful partnership?
Another worrying development for advisers is Fundsnetwork’s link up with FE Trustnet. This was announced at the start of November and was billed as an attempt by the duo to offer clients a ‘one-stop shop’ for implementing investment decisions.
Under the partnership FE Trustnet will continue to provide investors with data and fund research but this will be bolstered by a platform powered by FundsNetwork allowing them to invest directly through FE’s website.
Only a month prior to this FE launched 15 model portfolios aimed at advisers looking to outsource portfolio construction. At the time it said it was in discussion with a number of platforms to offer advisers direct access to these model portfolios.
So far it has not had any luck, according to head of research Rob Gleeson, who said platforms would be unlikely to sign an agreement until the model portfolios have a critical mass of advisers on board.
Advisers using them currently pay a fee for the research and asset allocation advice and then have to use the platform of their preference to execute the fund purchases.
If FE succeeds in getting its model portfolios on platforms (or perhaps one platform in particular?) will it be one step too far to at some point offer them direct to consumers?
FE is adamant it is not planning on circumventing financial advisers but I for one will be watching this space.
Background developments
Aside from the FundsNetwork/FE Trustnet tie up there are other platform providers that are rumoured to be amassing a direct to consumer proposition.
Portfolio Adviser wrote a couple of weeks ago on the trend of life company sales forces coming back to the fore.
One of the biggest life companies also has the investment expertise and platform proposition on hand to join all the dots and offer a compelling all round service without the help of the IFA.
Prior to the introduction of RDR and all that it has heralded many advisers have been used by fund groups as salesmen in disguise.
As regulatory pressure forces that relationship to change advisers should prepare for a switch in the distribution approach taken by fund groups as well.
Those with platform capabilities are perhaps a step ahead, those without will be working hard to catch up.
