Alliance Trust Savings is the latest UK wrap platform to be associated with the country’s retail structured products market as the firm considers including these products as an investment option within its platform offering.
Sara Wilson, head of platform proposition at Alliance Trust Savings (ATS), told SRP that as part of the “replatforming” process the firm is undertaking with online trading technology provider GBST the platform could open up model portfolios for discretionary managers with its adviser channel but also to other off-platform type of products.
“The current platform set-up is quite restrictive to what we deem to be off-platform type of products,” said Wilson. “However, with the new technology we will deploy early next year there will be a number of options around new asset classes. We are investigating a number of asset classes, including structured products.”
Wilson said that no decision has been taken and that ATS is assessing if there is enough demand from independent financial advisers (IFAs) in particular to include these as part of the platform’s offering.
According to Wilson, platforms have been traditionally focused on funds, equities, OEICS, investment trusts and assets “which are considered standard products under Mifid” and are traded in the same way, but structured products are middle ground in terms of complexity under the Mifid scope and this is a key element to consider by execution-only platforms.
“Whilst it is our responsibility to provide administration and a number of assets to clients (even if they’re advised) we still have to think about how appropriate are the assets to ensure that the right information is available for advisers to make an informed decision for their clients,” she said. “Ultimately, the FCA has said that platforms cannot just share responsibility for suitability and some of that responsibility lies on us.”
The speed of inclusion of new products on platforms, added Wilson, has to do with technology but once a platform moves to hosting non-standard investments then “there will be scrutiny and platforms will be required to demonstrate that they are providing sufficient information to customers to make informed decisions”.
RDR
Since the introduction of the Retail Distribution Review (RDR) in 2013, the UK structured products market has shifted towards the advisory space with providers unbundling their offering to accommodate the ban on commissions and allow adviser charge as well as deploying significant resources to promote them among platform and wrap providers.
Most recently Investec Structured Products teamed up with Novia Financial and global transaction network Calastone to offer automated dealing of structured products, a move welcomed by the industry as it proves that structured solutions can be transacted in the same way as any other product currently available via wrap platforms.
“The considerations around including structured products on our platform are related to how easy these products are to operate,” added Wilson. “We do everything in-house and simplicity in operations and the impact in operations, as well as accessibility of information and how we can support them physically in the platform will be a key element when making a decision.”
Wilson also said that it is important to see [structured products] providers making efforts to explain investors how products work and how can be transacted, as this will also “help getting pass some of the history” around these products.
“There is still some hesitation around structured products but due diligence should get through that,” she said. “From our perspective, we want to see an active demand which will justify the costs involved in facilitating the addition and managing another set of assets on our platform. We need to make sure these assets are going to be used by a significant proportion of our client base.”
ATS has £6.2bn of assets under management (AUM) of which £1bn come from intermediary assets. The firm plans to grow its advisory channel to £3bn by 2016.
“I think there’s going to be a lot of activity in the market up until 2016, and the forecast for growth is positive,” concluded Wilson. “We have seen year on year growth within the industry and more assets that used to be dealt directly are coming onto platforms. I think platforms will become a one-stop shop for investors.”
See also:
Investec launches automated dealing via wrap platforms
Investors shun advice as platforms take off in Europe
Technology will be key to lowering costs and bringing greater choice