Why is switching platforms so difficult?

In a study conducted by the FCA, significant barriers were identified when it comes to switching platforms, which could be limiting competitive pressure.

For some time, advisers have been critical of the time and cost involved in switching client’s platforms. The length of time it takes to switch between platforms varies considerably – the process is generally completed in a couple of weeks to a few months, but can take longer.

Other potential barriers include issues with transferring funds between different share classes and delays in moving model portfolio clients.

For non-advised clients, the process is likely to be even more complicated. The Financial Conduct Authority (FCA) states that 7% of consumers have tried switching platforms at some point but have failed, mainly due to the time involved, the complexity of the process and costly exit fees.

Most platforms have a large number of fees, different pricing structures and different ways of setting prices, for example, in pounds or as a percentage of the investment amount. Finding pricing information on platform websites can be difficult and inconsistent language makes it even harder to identify and compare similar fees across platforms.

The FCA states that different charging structures can, in principle, reflect different consumer needs and usage patterns; however, it feels the level of complexity appears to go beyond catering for this. The report demonstrates that the regulator is concerned with both the complexity and lack of transparency surrounding platform fees.

Fees can vary so it’s important that consumers understand what they are paying for, and are able to switch platforms if it’s too costly. This should be an option for all consumers, even if they chose not to do so. Platforms often serve as a back-office system for advisers and so should not be a costly burden for clients.

This has led to our recent announcement to scrap platform fees. Most importantly, as a result, there will be no increase in adviser charges to clients, no cut to adviser remuneration and no change to AFH’s investment proposition or portfolio construction.

If you’re interested in learning more about the benefits of becoming an AFH client, please do not hesitate to get in touch. Give us a call or fill out our online contact form and a member of our team will be in contact.

This article is for generic information only and should not be constructed as advice. Please contact us before proceeding with any course of action.

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