Nearly half (47%) of advisers expressed concerns that a platform could financially collapse within the next three years, according to the latest Scottish Widows Investor Confidence Barometer.
Scottish Widows’ annual survey revealed that platform financial strength was increasingly important for advisers.
Service (52%) remained the top priority, followed closely by value for money (46%) and price (47%).
Financial strength was cited by 35% of advisers, ahead of digital functionality (14%).
Additionally, 41% of surveyed advisers would exclude a platform from their shortlist if it had a ‘B minus’ financial strength rating or lower.
Advised clients were also more informed about the financial strength of their providers.
A strong majority (62%) of advised consumers reported knowing their platform’s rating, compared to just over a third (35%) of non-advised consumers.
When asked about the state of the platform market, advisers were divided; 40% believed it is oversupplied, while 39% disagreed.
As a result, 51% of advisers have strategies in place to protect client money beyond the £85,000 Financial Services Compensation Scheme (FSCS) limit.
The survey indicated that advised consumers were in a better position regarding asset protection.
Three-quarters (74%) of advised consumers reported having strategies to protect their money above the FSCS limit, compared to only 60% of non-advised consumers.
Despite concerns about potential platform failures, advisers also expressed mixed views on the benefits of mergers and acquisitions (M&A) in the industry.
Just over half (52%) disagreed that consolidation and M&A in the advice industry are beneficial for consumers.
Concerns about private equity ownership also surfaced, with 37% of advisers worried about its market share, while 43% were uncertain, and 20% were not concerned.
Ross Easton, head of platform proposition at Scottish Widows, said: “It should come as no surprise that the financial strength of platforms is a top priority for advisers, as it’s the pillar on which their business is based, and trust is formed with clients.
“This is also in line with the expanded mandate for assessing foreseeable harm from the FCA to ensure client money is protected.
Easton added: “Advised consumers are increasingly engaging with their providers and demanding the strongest assurances that their money is safe.
“Financial strength also impacts a platform’s ability to invest, with the advice market now expecting continuous innovation to keep up with intense competition.
“We’re continuing to roll out our £150m investment programme, working behind the scenes on enhancing our technology to give advisers everything they need digitally in this rapidly evolving market.”
