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The Financial Conduct Authority (FCA) has today published the Terms of Reference for the Investment Platforms Market Study, which sets out the scope and topics that will be covered.
Investment platforms are increasingly used by consumers and financial advisers to access retail investment products and to manage investments. The platform market has steadily grown over the last 8 years, with Assets Under Administration (AUA) for both adviser and direct platforms increasing from £108 billion in 2008 to £500 billion in 2016.
Many platforms offer investors and their advisers a range of information and tools to help them make investment decisions and some also offer their own investment products. As part of the study, the FCA will explore whether platforms help investors make good investment decisions and whether their investment solutions offer investors value for money.
In principle, platforms allow retail investors to pool their money and achieve better investment returns. The FCA will look at how platforms compete in practice and whether they use their bargaining power to get investors a good deal.
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. The FCA will assess whether these relationships work in the interests of investors.
For the purposes of this study the FCA defines ‘platforms’ broadly. The study will look at both investment platforms and firms that provide similar services by allowing investors or their advisers to access retail investment products through an online portal.
This Market Study follows on from the Asset Management Market final report published in June 2017, which highlighted a number of potential competition issues in the platforms sector (you might as well want to check IG’s response to FCA Asset Management Market Study).
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:
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.
The FCA welcomes feedback on the topics they will explore by 8 September 2017. The FCA aims to publish an interim report by summer 2018 which will set out preliminary conclusions and any potential remedies to address concerns.