The FCA platform paper has major implications for firms and we risk a situation where advisers are buried in avalanche of paperwork, which means dropping the ball on client facing activities and other vital aspects of running an advisory business. Paraplanners have a big role to play here and can pick up on the additional non-client facing activities introduced by the FCA paper. Otherwise, we risk an inefficient system where advisers are buried in paperwork and everybody losses – the client, the business, everybody.
So here are a few ways paraplanners are already stepping in…
Moving to clean share classes:
This include working out what clean share classes are available on a particular platform, whether this is cheaper or more expensive for clients and preparing letters of authority to clients. These are very time-consuming activities and an important area paraplanners can help.
Legacy Asset on platforms:
From 2016, trail income from legacy business on platform will dry up, completely. By legacy business, we mean every investment business written on platforms pre RDR with commission paid to advisers via rebate from fund manager. I know firms with nearly £20M held in this type of business!
And remember the April 2016 is the deadline, not the target date. Platforms don’t have to wait on until then and they can choose to implement this earlier. When moving clients from this type of business, remember that FSA rules on replacement business applies. So full cost comparison and suitability reports are required. This may also means moving clients into the model portfolio at the same time and again, suitability rules applies here too. Many ‘clients’ in legacy asset are dormant and advisers’ time are better spend on contacting and meeting this clients, while paraplanners can provide the much needed support in with the non-client facing aspects.
Platform Due Diligence:
The platform paper introduce new responsibility for firms under the clients’ best interest rules. Section 6.1F.1 R of the paper states….
A firm (other than a platform service provider) which:
- (1) arranges for a retail client clients to buy a retail investment product products or makes a personal recommendation recommendations to a retail client clients in relation to a retail investment product products; and
- uses a platform service for that purpose;
must take reasonable steps to ensure that it uses a platform service which presents its retail investment products without bias.
This means taking another look at the platforms used within the firm. The need scrutinise platform-fund manager relationship, especially where there’s a marketing pact between them, is now a key part of the adviser platform due-diligence exercise.
The role of paraplanners, in-house or outsourced, has never been more important. Clear distinction between advisory and paraplanning roles becomes even more important or we may end up with a situation where everyone is chasing their tails.