Nearly half (47%) of advisers think it is likely a platform could fail financially in the next three years, according to the latest Scottish Widows Investor Confidence Barometer.

Four out of ten (41%) advisers said they would exclude a platform from their shortlist if it had a ‘B minus’ financial strength rating or lower.

There was division among advisers over the benefits of merger and acquisition activity in the platform sector. Just over half (52%) disagreed that "consolidation and M&A in the advice industry is a good thing for consumers."

The picture was more muddied when it comes to private equity ownership, which has had a growing share of the advice market in recent years. More than one in three advisers (37%) were concerned about private equity market share, with a further 43% uncertain. One in five (20%) said they were not concerned.

In its annual survey, Scottish Widows asked advisers what the top issues were that came up in due diligence checks, which need to be carried out to comply with the Financial Conduct Authority’s Consumer Duty rules. 

Service (52%) continued to top the table, with value for money (46%) listed almost as frequently as price (47%). Financial strength (35%) was cited by more than a third of advisers, ahead of other factors like digital functionality (14%).

Advisers were split over whether the platform market is oversupplied: 40% agreed that it was, and 39% disagreed. Half (51%) of advisers said they had strategies in place to protect client money beyond the £85,000 FSCS limit.

Advised clients were much more informed than unadvised clients about the financial strength of the providers they use. Two thirds (62%) of advised clients said they know the rating of their platform/provider, compared to just over a third (35%) of non-advised consumers. Three-quarters (74%) of advised consumers reported that they had strategies in place to protect their money above the FSCS limit compared to only two thirds (60%) of non-advised consumers.

Ross Easton, head of platform proposition, Scottish Widows platform, 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. Advised consumers are increasingly engaging with their providers and demanding the strongest assurances that their money is safe.”

He said that financial strength also impacts a platform’s ability to invest, with the advice market now expecting continuous innovation to keep up with intense competition.

• The Scottish Widows Investor Confidence Barometer is a survey of more than 1,200 people conducted by Censuswide and Research in Finance for Scottish Widows Platform, which surveyed the following groups between 16 and 27 September: 501 advised consumers (those that have a financial adviser) with a minimum of £100k investible assets, who have a pension and are aged 35-70; 500 non-advised consumers (those that do not have a financial adviser), with a minimum of £100k investible assets, who have a pension and are aged 35-70; 200 (18+) financial advisers who have clients, with a representative split by age of the UK adviser population.