Planners consider moving off-platform

Industry executives are questioning the wisdom behind suggestions that financial planners should move their clients away from investment platforms.

Colonial First State (CFS) recently commissioned a report into the cost of moving and operating off-platform because this topic was often part of the company's conversation with financial planners.

CFS general manager strategy Scott Durbin said despite research showing the usage of platforms remained stable, many practices were contemplating making the move and administering clients themselves.

"There seems to be a disproportionate amount of discussion versus the actual reality of any moves off platform, but we wanted to get a fact base to sit behind those conversations about what the reality is for businesses that might be considering it."

The report, which was conducted by Praxis Partners, looked into two financial planning practices and found that the move was mostly driven by the shift away from pooled and towards direct investments in recent years.

However, while it concluded it may make sense for some businesses to operate off-platform, the cost of managing clients using alternative methods could be up to four times higher.

One of the businesses participating in the research was Eureka Financial Group, which decided to move 50 per cent of its clients off the CFS First Wrap in 2006, but quickly regretted its decision.

Eureka's specialist adviser Andrew Jones wrote in a Money Management column that the firm initially enjoyed having an unrestricted investment strategy.

"On the downside, as a business we really underestimated just how much administration we had to do to look after our clients' portfolios, as we'd now become the administrator and mail-house for almost everything," Jones said.

"Looking after clients with just portfolios of ASX-listed equities was pretty easy," he added. "What we didn't realise was just how much work goes on behind-the-scenes at the platform level: when administering managed investment schemes; direct fixed interest investments; international shares and the challenge of domestic equities."

Durbin said the additional administrative burden restricted the principals' ability to focus on business development.

"It shifted the principals' focus from client services and business development to administration and operational issues," he said. "One of the issues is the need to recruit, train and manage specialist staff."

In the years since the global financial crisis many clients have drifted away from managed funds - a trend which prompted all major investment platforms to add more direct investments to their menus.

However, head of operations and business solutions at Fiducian Portfolio Services, Patrick Jackson, questioned the ability of investment platforms to help advisers in the new regulatory environment.

"To navigate through [the Future of Financial Advice reforms], there is no doubt that the more administrative options for an adviser to satisfy the requirements the better," Jackson said.

"But it seems to me that most issues can be handled by financial planning software, which as you would expect, paints a far more holistic picture of a client's advice position."