Para-Sols paraplanner and investment specialist Alasdair Wilson shares his take on platform due diligence from a paraplanner's perspective, and the suitability questions he asks as part of the process.

Working in an outsourced paraplanning firm allows me to experience a wide range of the products and strategies advisers are recommending.

When looking at platform due diligence from a paraplanner's perspective, I thought it'd be useful to share the questions I ask myself when preparing suitability reports, and what prompts me to challenge the advice being given.

Is a platform suitable for the client?

This might sound obvious, but this should be the first key question to ask yourself when it comes to platform due diligence before you even consider going further.

Platforms are now widespread and form the backbone of most firms’ propositions, yet there are still many cases where a platform simply isn't the most suitable course of action.

One of the main benefits of using a platform is for consolidating assets.

Where a client only needs access to a single wrapper, then a platform might not be the most ideal solution.

For example, a young client looking to start a pension with a small lump sum might be far better off with a basic, standalone pension rather than a pricey platform-based pension wrapper.

On the other hand, if you have a client who has a pension with one provider, an ISA with another provider and an onshore bond with someone else then it's highly likely they could benefit from consolidation.

This isn't just the case from an ease of administration perspective.

Most platforms offer a tiered platform charge which reduces with increasing assets under administration.

Having three separate low-value plans with their own individual charging structures could combine effectively to drop the charges across all three policies.

Family linked offered by some platforms can reduce this charge further, so it's a factor worth considering  at the research stage of your due diligence. This in turns feeds nicely into rationale around charges and value for money.

Can the same goal be achieved at less cost to the client?

Charges are an absolute minefield, with very different attitudes across the industry with how they should be approached.

Personally, the key here for me is value for money, which does not necessarily mean the cheapest.

The analogy I like to use here is that of the car industry – if dealers always recommended the cheapest option as the most suitable for their customers, the whole country would be driving around in tiny city cars, despite people having large families or enjoying long camping breaks.

The spectrum of platforms runs from the basic and streamlined to the complex with extra functionality.

Charges tend to roughly follow the same trend – more features equals greater expense, the argument being that it costs providers more to offer those features.

Of course, this isn't limited to pure functionality.

Some platforms offer regional area managers, for example, to support firms using their platforms and to be on-hand for technical queries. This kind of service isn’t cheap to offer, but may prove invaluable to your firm.

Is the ideal investment strategy available?

Selecting an investment strategy and a platform is a bit of a chicken and egg situation.

You might pick the perfect platform for the client, which offers all the functionality they need for a competitive price, only for it to come unstuck when some of the funds you've researched for their investment strategy aren’t available.

There are two options here, though only one which is looked upon favourably by the regulator.

You can either go back and compromise on the investment strategy, or compromise on the platform which may be a bit more expensive, or a bit clunkier to use.

The latter is what the FCA would prefer to see – a suitable investment strategy is what's most important to the client, rather than a platform which may be a touch more expensive or where the main advantages might be more beneficial to the adviser.

This comes back to the value for money argument earlier – recommending the client pay a little extra to facilitate their perfect investment strategy is easier to justify than recommending a compromised investment strategy to save a couple of basis points in charges.

Can I service the client remotely?

As recently as two years ago, this kind of request was basically unheard of.

Why would you need to service a client remotely, when you have a great office space to welcome clients and host meetings?

Failing that, there was always the option of visiting clients at home, or perhaps meeting in a neutral venue over a working lunch.

But the pandemic put paid to that way of working, at least during the past year and a half.

Pre-Covid, there was only a handful of platforms which offered online onboarding and accepted digital signatures. Most still required a wet signature for applications and to process transactions.

We have since seen a seismic shift to trying to do everything remotely. Many platforms were reasonably quick to adapt, although admittedly it was far from plain sailing in the first few months of lockdown.

But there are still some platforms which require wet signatures for certain things, and this is something to watch out for as the situation around the pandemic remains fluid.

Overall, the first consideration should always be whether a platform is suitable in the first place.

This isn't asked enough, purely because platforms are now so commonplace that standalone products are overlooked.

Secondly, it is important to note that charges should only be a consideration once it's been established the platform is suitable in terms of functionality and whether the investment strategy can be supported, not vice versa.

Para-Sols is a subscriber to Platform Analyser, the tool we've developed to support firms in their platform due diligence. To see if Platform Analyser could help you, check out what it has to offer here