Efforts by UK regulator the Financial Services Authority to improve standards of advice and transparency across the financial services industry are gathering pace, and platform providers need to ensure they do not fall short of new transparency standards, warns Novia, the UK-based wrap provider.

The FSA published its Retail Distribution Review, detailing a programme of reforms on the provision of financial advice, in June this year; a review of wrap and platform providers is now also underway – a necessary move since according to Novia around 80 per cent of UK advisors now use a wrap platform.

In Novia’s view a lack of transparency will undermine some platform providers as they may have factored in opaque “kick-backs” into their financial calculations. Such opacity is the kind of practice the RDR is designed to stop as the regulator moves to ensure that clients know exactly what it is they are paying for, and the extent to which the advice they receive is truly independent.

To determine if their platform is RDR ready, Novia counsels advisors to ask if the platform reimburses all negotiated rebates back to the client, and if it is completely independent of any product provider influence or bias in the funds and assets it makes available. Also, in cases where the platform claims to be “free” to clients, advisors must ask how the breakdown of charges for advice, investment management and product wrapper administration is made transparent to clients.

According to Novia, advisors must also ensure their platform offers a broad enough range of investments, including alternatives and exchange traded funds – the latter of which are becoming increasingly popular due to their transparency, liquidity and low costs.

Another key concern highlighted by Novia is that of flexibility, as advisors will need to be able to set up different charging levels for different clients, depending on the level of work or advice required by each individual.