What's the process for determining the rating a platform achieves?
We recently published the star ratings in February. The process we follow is consistent across all wealth products and we believe it's also stringent and transparent. There's three steps to this process define, score, then rate. To define a product we must understand not only the total universe but also what we deem to be the included population. For platforms we follow the definition used by the FCA for retail platforms. Therefore we do not include providers who only promote their own funds.
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Talks us through what the core criteria are.
Core criteria is criteria that we feel all high quality platform products must include. For Defaqto we include core criteria for four stars and five stars, therefore a product can achieve a sufficiently high score to achieve 5 stars, but if it does not include all the criteria for 4 stars and 5 stars then it will only achieve a 3 star rating. An example of this would be where a particular platform does not include a personal pension or SIPP as a tax wrapper. If it does not include a personal pension then it can only achieve a 3 star maximum.
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How do you score criteria?
We score criteria by using a methodology called Data Numerical Analysis, or DNA. There's two ways in which we conduct the DNA analysis. The first method is whether or not a feature is available on a yes or no basis. If a feature is available, you score 5 DNA. If it's not available, 1 DNA. A typical example would be the availability of an ISA wrapper. If it is available, 5 DNA, if it's not, 1 DNA. The other approach is coverage. So we could for examples measure the range of investments available on a platform. The more types of investment s that are available, the higher the score you would obtain and of course, that would still be within the one and five range. It's just that we should deploy a range of scores form one through to five, as opposed to either or.
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How do you rate each product?
We rate each product by aggregating the scores. We then analyse the range of scores and apply boundaries for each rating from one all the way through to five stars.
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You've recently published the latest platform service ratings. Can you talk us through the analysis behind these?
The analysis for the service rating has three components. We ask financial advisers to place an order of priority on eleven elements of service. Examples of the elements could include new business administration, existing business administration or financial strength. Once they've placed an order of priority, we then ask each adviser to score that particular aspect of service. Finally we capture further elements of information about that particular adviser's business. It could be the nature of their advice status, the number of platform they use and indeed the proportion of their business that they place onto platforms.
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What stood out for you from the results of your recent service survey.
The most important trend that we observed in the recent survey was the increasing number of advisers that change their preferred platform. In 2018 this has risen to 25%. This was previously 16% in 2017 and 10% in 2016. So this is significant upswing.
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What do the star and service ratings signify?
To understand what the star and service ratings signify, it's important to consider them within the overall context of Defaqto's mission. Defaqto's mission is to help individuals and financial institutions make better informed financial decisions. Both ratings help achieve this by simplifying the methodology for buying a financial product. A star rating is an expert assessment of the features and benefits of a financial product. Five stars represent the most comprehensive and on star the lease comprehensive. The service tagins are representative of the feedback we receive from financial advisers about the service they receive from product providers. A gold award is the highest level of service and a bronze award the lowest level of service.
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Why are Defaqto ratings important to advisers?
The ratings are important for advisers for two reasons. Firstly, the ratings help advisers segment the platform market when they're undertaking the exercise of creating their centralised investment proposition. The second aspect is it helps them make a quick assessment about the appropriateness of the advice they're given when making a personalised recommendation.
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Why do your platform ratings mean for adviser's clients?
The ratings give the end client reassurance that the rating is the conclusion of an expert assessment of a particular financial product. It's also very important to note that Defaqto has a consumer awareness of 70% within the market place and of those consumers who are aware of our brand, 93% think the star rating is useful when making a decision about purchasing a financial product.