An increasingly important function of IFA platforms with regards to UK wealth managers is to educate them about the Retail Distribution Review, says Christopher James, director of institutional services at Cofunds.

James told this publication that the UK-based platform is looking to provide what he describes as a utility service for the high-end wealth management industry.

There is no doubt that the UK regulator’s RDR, which will come into force at the start of next year, will be a big change for all companies involved in selling and distributing funds - but no-one knows exactly how it will pan out.

“There are different strands to the RDR: advice, transparency, fees, knowledge about what you are selling,” James says. “Those are the bits the private banks understood straight away."

“What they struggle to understand is the infrastructure commitment driven by the RDR,” he says. “People are only now finding out about things like that you need to provide the Key Investor Information Document for all products and that you need to understand your commercial model in terms of the share class.”

James says that Cofunds is having “open discussions” with wealth managers about implications of the new regulation, but he does not try to hide the fact that it has generated a lot of business for his company: “It sounds too grandiose to say ‘once in a lifetime’, but you have a market event with the RDR which is pushing everyone to renew,” he says.

The platform has picked up several smaller stockbrokers in the last couple of weeks, but also major wealth managers such as Vestra Wealth and, most recently, Charles Stanley, which have both chosen Cofunds as their fund custodian.

“The deals with the big fish take six months for us to work out, and Charles Stanley took in fact even longer,” he says. “We have two or three in that size in the next six-month window.”

James says that the rate of new clients at the firm's institutional division is four to five times higher than a year ago.

The future of the platforms

The so-called mass market made up of sophisticated retail investors rather than high net worth individuals is still dominant among the major players in the IFA platform industry and Cofunds is no exception. However, in their institutional arms, which are separate from the fund supermarkets, platforms act as fund custodians for more and more private banks.

There are currently over 30 platforms in the UK. Four out of five of financial advisors polled at a Schroders conference in October last year said they think there will be fewer platforms in the UK in five years’ time. Four out of five also said they believe that platform fees will be lower or significantly lower by 2016.

“You will find that the cost of entry will come down, and it is nothing special for platforms but with any product in any aspect of anything when competition increases,” he says. “Cofunds has long thought that the number of platforms will go down, and we continue to think that, but every week the number goes up.”

Cofunds has £37 billion ($58 billion) in assets under administration, and about 40 per cent of the firm’s institutional business comes from wealth managers, according to James.