FCA to investigate adviser platform choice

Are returns to rich for the platform providers

Are returns to rich for the platform providers

The FCA estimates that assets under management across the online platform market as a whole increased from £108bn in 2008 to £500bn in 2016.

The Financial Conduct Authority today (17 July) set out the details of how it will investigate the investment platform market to ensure it is providing value for money and a fair service to investors.

According to the FCA, a principal-agent relationship often exists between consumer and adviser in this area because, when consumers receive financial advice, their adviser may also recommend a platform to use or may choose a platform on behalf of their clients.

"Through the market study we will diagnose whether platforms" tools and investment solutions are meeting investors' expectations in terms of the way they are explained and the value they offer, ' said the FCA. "The FCA will look at how platforms compete in practice and whether they use their bargaining power to get investors a good deal". The FCA will look at how platforms decide on asset allocations on model portfolios and how these are assigned to clients.

"We will seek further insights from platforms regarding the underlying consumer groups for these products if there is indeed an increasing flow of funds into them over time".

To provide investors access to retail investment products and information about these products, platforms interact with other platforms, advisers, asset managers and fund ratings providers.

But it says: "Consumer harm may arise if the interests and choices of the adviser and investor are not aligned".

The study will therefore consider how this relationship affects "the competitive dynamic" between platforms.

'Platforms have the potential to generate significant benefits for consumers and we want to ensure consumers are receiving these benefits in practice, ' he said.

"We want to assess the impact advisers have on platform costs and quality, understand whether the benefits advisers secure from their platform are passed onto investors and how use of a platform has affected adviser charges", the FCA said.

The FCA has requested that feedback be submitted by September 8, 2017, and announced that the release of the interim report has been scheduled for the summer of 2018.

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