A platform is an online service that allows financial advisers to manage their clients' investment portfolios. Some platforms can be used by customers directly.
In its most basic form, a platform aggregates data from several sources to provide a consolidated view of the client's total investments.
Many platforms, however, also provide facilities for investments to be selected, bought and sold. Some platform operators use their platform to sell their own products as well as those of other providers. Products on offer commonly include ISAs (Individual Savings Accounts) and SIPPs (Self Invested Personal Pensions), life insurance products and a wide range of collective investment schemes.
In addition, platforms can offer a range of investment profiling and planning tools, including tools for analysing clients' attitude to risk and for allocating assets between different asset classes. Some platforms provide model investment portfolios for different types of client, or a guided architecture service, which allows access to a limited number of funds rather than the whole of the market.
Wraps and fund supermarkets
The terms "wrap" and "platform" used to be more or less interchangeable, but as the market has developed, a wrap is usually understood to refer to a type of platform offering access to a wide range of investments.
Wraps receive remuneration from product providers and also charge a separate fee for their services which is paid directly from the customer's cash account on the platform. Rebates from product providers are sometimes credited to the customer's cash account and used to pay the wrap platform fee and any fees the customer has agreed to pay their financial adviser.
The term "fund supermarket" generally refers to a platform that offers a narrower range of products than a wrap, although this may not always be the case.
Virtual or shallow wraps merely aggregate data from several sources to provide a single valuation of a customer’s assets.
A corporate wrap or platform is a slightly different concept. It is a means by which an employer can offer HR benefits to its employees. The employer provides a link from its intranet to an adviser or product provider which offers wrap products and services in the workplace and permits easy payment of premiums by way of payroll deductions.
Wrappers
A wrapper (or product wrapper) is not an investment in its own right. It is a product used to hold cash and investments, such as a pension or an investment bond. The wrapper appears as an account on the platform, where its performance can be monitored and its components varied alongside and in conjunction with other Investments held by the client.
A tax wrapper (or tax-free wrapper) is a tax-favoured savings account used to hold cash and investments as above. Examples would be ISAs, SIPPs or child trust funds (CTFs).
Regulation
Platforms themselves are not regulated as designated investments. But when operated or used, they generally involve one or more regulated activities, such as dealing as an agent, arranging investment deals, safeguarding and administering client assets and sending dematerialised instructions.
Firms carrying out such activities by way of business must be authorised by the FCA. Platform operators are also subject to prudential requirements including capital adequacy standards.
