FCA details plans for investment platforms probe

Are returns to rich for the platform providers

Are returns to rich for the platform providers

"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". "Through the market study we will assess what impact these relationships are having on competition and whether they are working in the interests of investors".

Product suitability will also make it into the FCA scope of analysis, looking at whether platforms' risk profiling tools match investors to a portfolio mirroring clients' risk level.

The FCA is set to investigate whether model portfolios and multi-manager funds offer value for money to clients as it publishes its terms for a probe into the platform sector.

For the purposes of this study the FCA defines "platforms" broadly.

In either case, the FCA argued, it was likely an adviser's preferences would be a key determinant in the selection of the platform and the study would therefore explore the impact this has on competition between platforms by exploring the question "Do adviser platforms compete in the interests of the end-investor?"

"We will explore what factors advisers prioritise when choosing, reviewing and deciding whether to switch platform, and whether platforms consider the end-investor when competing to win business from advisers", the FCA said. 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 study follows on the heels of the Asset Management Market final report, that came out last month and brought to stage front several possible competition issues among platforms.

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.

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

The FCA aims to publish an interim report by summer 2018, which will set out preliminary conclusions and any potential remedies to address concerns.

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