The Financial Conduct Authority is exploring whether platforms should be forced to keep tabs on whether clients introduced by an adviser are still receiving advice.
In a 110-page interim report on the state of the platform market, published today (16 July), the FCA revealed plans to make fund supermarkets up their game and asked for views by 21 September 2018.
Final rules for what will be required of platforms and advisers who use fund supermarkets will be produced at the start of next year but to improve outcomes for orphan clients, the FCA said it was looking at ways to tackle price discrimination between those who are advised and those who invest direct.
The watchdog revealed it is looking whether it should require platforms to have a process in place to get customers who were introduced by an adviser but then did not receive ongoing advice to switch to a more appropriate proposition.
The FCA stated it would consider requiring adviser platforms to check, if there is no activity after a year, that their customers are receiving an advice service, and inform the FCA of orphan clients who are still paying an adviser for advice they no longer receive.
Platforms were also told in the paper to give intermediaries more data on platform charges and performance.
The FCA suggested rules requiring platforms to put in place open data solutions where customers can export their usage history (including trading patterns, pot sizes and information about their funds) to third parties.
Platforms were also told to buck up their ideas when it comes to facilitating switching.
The industry was told the FCA was considering ordering it to publish data on transfer times so consumers and third parties could compare platform performance and put pressure on platforms to make improvements.
If platforms haven’t improved the turnaround times for switching by the first quarter of 2019, when the FCA will issue their final report on this issue, the watchdog said it will consider banning exit fees and requiring the ceding platform to switch consumers to the receiving platform’s share class before a switch takes place.
The regulator also revealed it is considering whether to issue more guidance to clarify its expectations for adviser charging for switching platform.
The FCA said: "Many advisers told us that they charge additional advice fees for switching platform because it is a full advice event which requires them to produce a suitability report.
"We recognise advisers need to be fairly paid for their work. But it is not clear to us why meeting suitability requirements to switch platforms should outweigh the benefits of switching platform."
The regulator also stated potential areas of non-compliance with existing inducement rules were uncovered.
The FCA stated it found some advisers use services including the provision of some adviser education and training courses, white labelling, and bulk rebalancing and model portfolio management tools, which were likely to benefit them but not necessarily their clients.
The watchdog stated some of these services were likely to be so-called non-monetary benefits, so they were likely to be caught out by the FCA’s inducement rules.
The FCA stated: "Advisers need to demonstrate that these benefits are acceptable minor non-monetary benefits, for example because they can enhance the quality of the service to the client and will not impair the firm’s compliance with its duty to act in the client’s best interests."
emma.hughes@ft.com
