Financial advisers may be forced to leave behind old legacy platforms and wraps in favour of newer systems if they wish to achieve total MiFID II-compliance.

Investment platforms have become increasingly commonplace in the past several years. Since just 2008, the platform sector has increased in value from £180bn to £592bn in 2016.

In the past several years, however, there has been a growing sense of dissatisfaction with the platforms and wraps on offer to both financial advisers and consumers. In June 2017, the UK’s Financial Conduct Authority (FCA) acknowledged this by beginning MS17/1 – a market study into investment platforms. The study claims that ‘investment platforms are increasingly being used by consumers and financial advisers’ and outlines its primary focus as being to ‘improve competition within this market and develop better consumer outcomes’.

While this market study has not been completed as of yet, the interim report published in June 2018 outlines several key problem areas which FCA argues must be rectified. These include, but are not limited to, the following:

  1. Switching between platforms must be made easier  
  2. Comparisons between platforms must be made easier by way of an increase in transparency 
  3. Consumers with large cash balances must be made aware of capital erosion risks

While these issues may have may have been simple inconveniences prior to 2018, since MiFID II was implemented on January 3, they have become legal necessities. As such, the pressure on platforms to make these changes has been greatly increased in the last 12 months, likely meaning that any change will be greatly expedited.

If platforms hope to become MiFID-compliant and remain viable, they must provide clearer breakdowns of fees, better cost and charges disclosure, more accurate and thorough transaction reporting and, more broadly, a more involved and supportive service.

Speaking at an outsourcing masterclass for FTAdviser, Lawrence Cook – director at Thesis Asset Management – claimed that the platforms which will thrive in the post-MiFID II economic landscape will be those that offer some form of collaboration with the advisers using them. There has to be a partnership beyond a simple service.   

Cook went on to argue that platforms must consider the long term. While most platforms put a lot of focus into helping clients in the accumulation stage, cook stressed that platforms must begin to consider how best to cater for clients in the decumulation phase.

This is just one of an innumerable set of adjustments that must be made within the financial sector if total compliance with MiFID II is to be reached. Platforms must adapt to the new financial landscape if they are to have any chance of surviving and thriving in the coming years.

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