UK financial advisers are becoming increasingly pragmatic this year in their attitudes towards investment platforms.

Practical considerations, such as simplicity of use, a range of investment products and pricing, have grown in resonance as primary drivers behind adviser choice to use one platform versus another.

Of limited importance are factors such as ownership structure of platform, a platform’s brand and having a clear vision of a platform’s strategic future.

Clearly, British advisers are living in the ‘now’ – reflected by the fact the impact of platform and fund manager charging as a primary driver of decision making has jumped from 15.1% to 22.0%, according to 2010 versus 2011 figures.

With many advisers’ clients facing some tough economic realities, it seems advisers are also streamlining their attitudes during what is a particularly difficult economic period for Britain.

The simplicity of use was the primary driver of use for 25% of advisers, followed by 23% for a range of investment products and 22% for platform and fund manager charging.

Meanwhile, when CoreData first established its UK business in 2006 and started looking into the UK platform market, there was a lot of cynicism among advisers, many of whom were bitter after years of being fed broken promises and poor service from a variety of old-style life companies.

It has taken some time for the memory of those experiences to evaporate – combined with increased understanding of what platforms are and can offer a business.

In 2011 the industry is now in a position where advisers are happy to use rising stars of the platform space but from older style life companies, such as AXA’s Elevate and Standard Life’s wrap, and more recently the dusted off and re-polished Aviva offer.

However these three companies, as is the case for other (relatively) new stars in the industry, have a long way to travel before eclipsing the truly huge behemoths in the investment platform jungle.

Competition is very healthy in the UK investment administration sector – with in excess of 25 providers vying for a share of adviser-client assets.

The 2011 CoreData Research Platform Benchmark study is an annual syndicated study aimed at delivering administration provider’s key insights into the shifting demands of independent financial advisers (IFAs) and comprises an array of empirical data that identifies developing trends in the market.

Greener Pastures

Have you ever left a job for the promise of greener pastures, only to find that it failed to live up to your expectations?

Perhaps the responsibility was too stressful, the money insufficient to compensate for the workload, or the job description just didn’t accurately reflect what it was you ended up doing.

It’s a common problem for employees, but it also helps explain why around 50% of businesses fail in their first year.

Put simply: the reality of owning a business does not always reflect prior expectations.

According to CoreData’s research, one-quarter of advisers believe that having their own AFSL trumps all other offers in the market.

Some 24.4% of 1558 surveyed named having their own AFSL as the most attractive offer – three times more than the next most attractive licensee offer (Charter Financial Planning, with 8.0%).

Yet in reality, many advisers fail to practise what they preach by leaving their licensee and branching out alone.

There is some evidence, however, that the perceived attractiveness of having an AFSL is translating into actual establishments.

Paragem’s wholesale AFSL set up almost two years ago, has been growing at a steady rate and now has $140 million under advice. The group’s dealer services IFA network exceeds 200 licensees and around 1500 authorised representatives.

So what is it that’s stopping a mass exodus from Australian licensees?

Burningpants has a sneaking suspicion that it is for the same reason that many super fund members, despite wanting control, don’t go down the route of self-managed super (SMSF).

They perceive it to be too much hassle.

Likewise, one of the most common reasons for abandoning the SMSF for the APRA-regulated sector is the compliance burden. Many trustees just didn’t realise how much work was involved in managing their own super.

With the Future of Financial Advice (FoFA) reforms imminent, including new requirements for clients to ‘opt-in’ to receiving advice biennially and more stringent requirements for planners, perhaps setting up an AFSL is a bridge too far.

CoreData’s new report titled The Grass Is Greener benchmarks the relative attractiveness of owning an AFSL vs joining a licensee; explores the reasons why advisers do set up their own AFSL – and whether their expectations were met.

The research will be available in August.

For more information contact CoreData on 02 9376 9600.