There is a deeply mistaken view that pervades board and executive teams in asset management and many platform businesses. It is that decisions on fund and platform choice are centrally controlled. They are not. Instead, the reality in most cases can be summed up as: central influence, local choice.

Platforms and asset managers have cut back sales teams as firms focus on a small number of central decision-makers. These gatekeepers have outsized reputations as king-makers. They are feared and revered. Powerful as they may be, their influence has been exaggerated.

The new mantra needs to be: central influence, local choice.

We all know the stats: the financial advice market is fragmented. 89% of financial advisers work in firms with five of fewer advisers (Source: FCA). NextWealth research shows that half of firms have fewer than 10 employees.

Reaching this disparate group of financial advisers has been tricky. The rise of gatekeepers was welcomed by pencil-pushers who wanted to slash their sales teams. Pundits made headlines with claims that 100 gatekeepers influence fund flow. Deals were struck to get on the panel or white list for nationals and networks. Research agencies have made a mint rating funds. These ratings act as a screen to advisers looking to produce a panel. This influence is real but it’s only half the story.

Centralised decision-making of course does happen in a handful of large vertically integrated firms. We’d argue that for Intrinsic and OpenWork, it makes sense to focus efforts centrally. But for consolidators, networks and nationals, the adviser is still free to choose — albeit from an agreed list. These firms may have their own DFM and CIP but advisers and paraplanners make the final choice. Again, the choice is influenced centrally but the decision is made locally. In these firms, having good representation on the ground to supplement the central relationships can be critical to securing flow.

Firms looking to reach advisers through support-service firms such as threesixty and Bankhall absolutely need local servicing for advisers. We see evidence that better local representation leads to better flows for platforms. We hear the same applies to fund flow.

With the exception of a few more centrally-oriented firms, the decision of which platform or fund is used in a client portfolio ultimately is made by the financial adviser or paraplanner. Central relationships are vital to getting on panel but the final say sits locally.

As you finalise budgets for 2020, remember: central influence, local choice.

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About the Author

Heather is a data and research expert specialising in retail investment distribution. Heather is the Managing Director and Founder of NextWealth. She is also a Director of Clive Waller Consulting Ltd and serves as Vice-Chair of The Investment Network and the Schroders UK Platform Awards.