The FCA’s recent Investment Platforms Market Study interim report has identified a number of issues with the market. Principle among these are suggestions that market competition is not working as well as it could for some consumers.
The report voiced concerns that customers who want to switch platform, those who use model portfolios or direct-to-consumer platforms, consumers with large cash balances and orphan clients are potentially losing out.
One of the report’s key findings was that consumers who use fund supermarkets are not being informed of ongoing fees.
Overall, the report highlighted a general lack of communication between both IFAs and direct to consumer platforms and their clients, which the FCA believes may be hindering market competition.
There were also concerns that customers with large cash balances may not be aware that they might be missing out on significant investment returns by not fully exploiting the range of platforms out there.
Interestingly, these customers tended to use non-advised investment platforms – elsewhere, the report noted that investors with high cash balances are more likely to eschew advised platforms.
In response to their findings, the FCA has announced a package of remedies that chiefly target these groups.
The regulatory body has said it will assess market progress between now and its final report to see if any further measures are needed.
Here is a summary of the FCA’s proposed remedies for the platform market in 7 simple points…
- More support for consumers on direct to consumer platforms who may find it difficult to shop around and choose the most price competitive platform.
- Encouraging platforms to drive competition between asset managers.
- Helping consumers on non-advised platforms with large cash balances to take into account charges on their funds, interest and investment returns they may be missing out on.
- Making it simpler for consumer and advisers to switch platforms.
- Making adviser platforms more functional for orphan clients.
- Ensuring that customers are aware of any unexpectedly high risk levels.
- Addressing any potential infringement of FCA rules.
As well as introducing these measures, the FCA has said that the industry as a whole needs to step up and make a greater effort to improve competition.