FCA to investigate investment platforms

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Investment platforms that allow consumers to run their own portfolios – often in an individual savings account (Isa) or self-invested personal pension (Sipp) wrapper - are to be investigated by the regulator.

Between 2008 and 2016, the amount of money invested with these platforms (sometimes called fund supermarkets) has grown from £108 billion to £500 billion.

Popular platforms amongst investors include AJ Bell, Best Invest, Cavendish Online, Charles Stanley Direct, Hargreaves Lansdown and Interactive Investor (Moneywise’s parent company).  For more details read Our guide to the best investment platforms for beginners.

The Financial Conduct Authority wants to establish whether often investors are getting good value for money and whether they are helping them to make good decisions about how and where they invest.

It also wants to know whether platforms are using their bargaining powers to get investors the best deal and whether the relationships they have with fund managers, ratings providers and advisers have the best interests of investors at their heart.

The investigation will consider platforms that deal directly with consumers and those that can only be accessed via advisers. As such online platforms, those offered by insurance companies, banks or wealth managers are all likely to fall into its remit.

Is competition between platforms working in the interests of consumers?

Commenting on the report, Christopher Woolard, executive director of strategy and competition at the FCA says: “With the increasing use of platforms, and the issues raised by our previous work, we want to assess whether competition between platforms is working in the interest of consumers. Platforms have the potential to generate significant benefits for consumers and we want to ensure consumers are receiving these benefits in practice.”

Tom McPhail, head of policy at Hargreaves Lansdown adds: “This study recognises the vital service platforms now provide to millions of people, helping them to save and invest for their future. The advice gap remains and platforms have an important role to play in delivering guidance and support to investors, many of whom need help if they are to invest with confidence.

“Platforms can also bring pressure to bear on asset management costs, negotiating discounts for investors, promoting good funds and highlighting poor performers. This paper is not simply about the price charged by retail investment service providers, it is about the value they deliver to investors.”

 

Published: 17 July 2017
Last updated: 17 July 2017

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