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Platform switching constrained by complexity and cost

9 May 2019

Over half of advisers are avoiding switching clients to a different platform because of the administrative complexity and cost involved. 

A new report by the lang cat and AJ Bell found 56% of advisers felt constrained from recommending a transfer, despite the fact it could benefit clients. The research, which surveyed 95 adviser firms, showed that nearly 25% found the process of transferring between platform providers either a “huge undertaking” or “absolutely brutal”.

However, the report warned that advisers could not avoid platform transfers because they deem it administratively difficult, with COBS and PROD both clear that advisers must review the suitability of their platform recommendations and transfer clients where a more suitable platform for their needs is available.

Mark Polson, founder of the lang cat (pictured), said: “It’s clear there are cost and process issues that are preventing transfers from working properly. However, the regs state that advisers should recommend transfers where they are in a client’s best interest. The fact the initial advice recommendation may be their primary platform that they prefer to use is neither here nor there.”

The report discovered a 0.16% differential across ISAs, self-invested personal pensions and general investment accounts for clients with £500,000 from the lowest cost to the most expensive across the platform market. Over a 30 year investment period, this differential could add up to over £90,000.

Andy Bell, chief executive at AJ Bell, said: “I have a lot of sympathy with advisers when it comes to platform transfers but unfortunately it is not an area where they can stick their head in the sand. The lang cat report is essential reading for any adviser grappling with their obligations around platform transfers under the PROD and COBS rules.  I agree with the conclusion that this is an area where the regulator needs to provide more guidance for advisers.”

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