3 - The Market and the Platform Service Provider

• Types of investors

  • Those who want to make their own decisions and look after their own investment accounts
  • High net worth individuals (HNWIs) who pay for professional investment management services
  • Investors who use services designed to help with investment decisions
• Self-service clients


  Clients who approach a platform provider directly and request an account to access assets and products available, referred to as 'execution-only' clients
• High net worth individuals (HNWIs)


  Individuals who pay for professional investment management services, including asset allocation, stock selection, tax management
• Discretionary investment manager


  Professional who enters into transactions on behalf of the client with authority tailored to specific requirements
• Firms may use additional features offered by the platform to provide a coordinated and efficient service across their various clients without breaching the personalised requirements of each discretionary mandate
• Services for investors

  • Self-service clients
  • High net worth individuals (HNWIs)
  • Investors who use services designed to help with investment decisions
• Robo-adviser model

  Reflects a risk rating performed electronically within a portal which then suggests a portfolio to the client
• There continues to be a market for personally advised services, particularly for those who do not require the full services of a discretionary investment manager but want to talk over their financial affairs with a professional
• Platform business model

  Enables the investor (and their adviser) to view their entire portfolio on a single screen, place buy and sell orders, see details of executed transactions, income payments, and corporate actions
• Benefits to the investor

  • A wide range of assets are available
• The platform aggregates these investor-level transactions, resulting in a smaller number of market trades – each being of higher value, producing greater operational efficiency
• Benefits to the investor

  • A wide range of assets are available
  • Centralised paperwork – a single statement gives information on all assets and wrappers on request
  • A single ISA or pension plan within the platform can hold funds from various providers
  • Increased flexibility to switch assets
• Benefits to the adviser/discretionary investment manager

  • Simplified administration
  • Efficient buying and selling of investments on behalf of clients
  • Increased time to spend on advising clients and achieving sales
  • Reduced time spent on building a portfolio from the schemes of various providers
  • Simplified switching between schemes and different providers – using a platform reduces the time when the client is out of the market, and reduces the adviser’s costs
  • Integration into existing back-office systems
• Benefits to the product provider

  • Administration costs can be reduced significantly as only one account is maintained on the register, in the name of the platform’s nominee company
  • Reduced maintenance tasks and less time spent on correspondence and telephone queries
  • Fewer contracts to be processed and much less paperwork handled
  • Only one distribution payment is made
  • If the product provider is also a fund manager, the platform can be a reliable source of securing new investment in the fund manager’s fund range
• If a product provider or investment provider is able to reach agreement with a platform provider for its products to be sold on that platform


  The provider gains access to a large potential market without the costs of directly contacting those potential investors
• Tools and Services

  • Web portal (or other user interface)
  • Transaction processing and settlement service
  • Custody service
  • Ancillary and value-added services
• Web Portal

  Enables users to see the current state of their holdings, instruct activity, and access other services
• The web page that summarises the current holdings is sometimes known as the ‘dashboard’
• A platform investor might wish to review various aspects of their portfolio
• The financial adviser might need to see the combined picture of all its customers with similar investment objectives
• Transaction and Settlement Services


  The platform accepts transaction orders from the investor, performs the market activities necessary to turn that order into an executed trade, and achieve settlement of that trade
• Switch

  Instructions to sell one asset and purchase another, commonly referred to as a 'switch'
• Platform performs the 'buy-side' of a switch


  On the day after the 'sell-side', after processing the broker confirmation of the sale transaction
• Custody service

  Ensures that any assets taken into the platform's care are held securely for the investor
• Asset transaction

  Involves the exchange of money for investments, ensured by the custody service to take place correctly and keep client's assets separate from the platform's assets
• Banking services


  Obtained from retail/high street banks to allow investors to easily pay money to the platform, including processing direct debit instructions and placing deals once money is received
• Ancillary services

  • Capital gains tax (CGT) calculators
  • Portfolio modelling
  • Risk management tools
  • Administrative tools such as access to fund literature and investor information documents
• Value-added functions may be of relevance to the investor, while some are primarily included for the benefit of the adviser
• Transferring a new client's assets onto a platform

  Entering data for each holding including asset identification, quantity held, original cost, current custodian, product/wrapper, and current value. Updating the dashboard, obtaining market price, initiating transfer request, ensuring stock transfer, and providing ongoing asset reconciliations
• Advisers are no longer paid commission by authorised fund managers (AFMs), instead, they charge investors a fee for their services
• Platform fee can be 'bundled' with the adviser's fees or 'unbundled' where the platform operator invoices the investor directly
• Operational tasks for which an investor should pay a discrete fee may be known as a 'click charge'
• Administrative costs of all tasks on a platform may be covered through standard annual fees applied to each account
• Each platform will determine whether there are any operational tasks for which an investor should pay a discrete fee (sometimes known as a ‘click charge’), or whether the administrative costs of all tasks will be covered through the standard annual fees applied to each account
• Activities subject to specific charges

  • Asset buys/sells
  • Voting at company meetings of assets
  • Property investments within SIPPs wrappers
• Activity-based charges


  Usually set as a fixed cash amount
• Variable charging model


  Platform collects higher amounts of charges as the investor’s account value increases
• The FCA has created new rules that require platform operators, product providers, fund managers, and other types of regulated firms to consider the financial value of their offering to retail investors
• Requirements for firms under the new rules

  • Customers receiving a similar service should pay a similar charge
  • The charge should be proportionate to the firm’s services for the customer
• If a platform aspires to service the adviser community, it will need to support more specialist requirements