Why investment platforms are dead

I can’t see how using a platform is in a client’s best interests. The cost versus benefit equation simply does not stack up.

Every year I review the platform offerings available to see what has changed. Once I’ve assessed the various product enhancements, fee changes, new investment options, revised insurance offerings and so on, I then pose this question to myself; should I advise my clients to move into a platform because they will now be better off?

For 2012, the answer is again no. Here’s why.

I’m yet to see a platform that provides access to a range of term deposit and cash options from a range of providers, a competitively-priced share trading facility with research and access to the entire ASX, an extensive list of wholesale managed funds, a fantastic insurance offering with access to a number of insurance providers, comprehensive reporting and online functionality, great service and a fixed fee that is not influenced by funds under management. Unless a platform can deliver all of this, clients will continue to be better off not using a platform.

Sure, platforms are improving, but I can’t see how (in their current form) they will ever get to a point where they will be in a client’s best interest. Radical change would be needed for that.

The question is whether platform providers will respond? Time will tell, but I suspect for as long as conflicts of interest are allowed to exist in financial planning where aligned advisers (who make up around 85% of the industry) are forced to use their own dealer group’s platforms, there won’t be any significant changes. Money talks at the end of the day.

Having said this, the financial planning landscape in Australia continues to evolve. More than ever, there is a far greater emphasis on high quality advice that adds quantifiable value to clients. A by-product of quality advice is acting in the client’s best interests so with this in mind, it will be interesting to see whether the recent trend of advisers starting to migrate away from platforms gains further momentum.

Regardless, in the short-term at least, platform providers will inevitably continue to polish models that are under-featured and overpriced.

 


This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax advice prior to acting on this information.Opinions constitute our judgement at the time of issue and are subject to change. Financial Planning Expert Pty Ltd does not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
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    Financial Planning Expert is an independent financial planning business based in Melbourne. We provide genuinely independent and conflict free financial advice. We’re experts in self-managed superannuation fund (SMSFs) advice and strategy, retirement planning, property and share investment advice, life and income protection insurance, tax planning, asset protection, estate planning and advice for Australian expatriates.