The latest FCA review, this time on platforms, could be pivotal for investors.
Over the past decade or so platforms have grown hugely more powerful, influencing how we buy, what we buy and how much we pay.
They had a massive £500bn of assets under administration last year according to the FCA – a number that is rapidly moving towards the £600bn mark. Their power is such, both in the world of the private investor and advisers, that the behaviour of platforms is an issue of significant public interest.
Some platforms reap huge profit margins that could never be replicated in other industries, such as retail.Their charges, how they operate and how they use their influence will determine whether many millions retire rich or poor.
Yet they have, until now, largely escaped the level of scrutiny most other sectors of the investment industry have faced.
Some platforms reap huge profit margins that could never be replicated in other industries, such as retail.
They tell us that they use their power to negotiate lower charges from fund managers. But the majority of investors will have no idea how much they pay to platform or how those charges affect long-term returns from their investments.
Charging a fair price for a service is one thing, milking uninformed investors is another entirely. Advised platforms have their own issues. Advisers’ preferences are likely to be the key factor in the choice of platform.
So who are these platforms trying to please: the investor or the adviser? In an ideal world these aims would dovetail – but the past offers worrying lessons in how this is not always the case.
Another area worthy of investigation are those companies that advise, run platforms and run funds.
These may be offering investors simplicity and the best of all worlds. But flags have been raised in the industry.
The temptation to push investors towards the in-house fund must surely prove too great for some.
Investors’ money is stretched thin. It needs to provide profits not only for fund managers, but also for platforms and advisers – and, hopefully, the investors themselves.
Platforms have placed themselves at the hub of the process so if their influence is corrosive rather than positive then the sooner the FCA gets on to this the better.
In a year’s time we will hear the initial findings on whether all is well in the platform world. My hunch is that it will not be.
Savings and fast cars
What are we to make of the plunging savings ratio, which hit a record low of 1.7 per cent in the first quarter of this year? The long term average is 9.2 per cent.
So has the lack of saving has gone from problematic to potentially catastrophic?
It is worth considering a few things before we panic.
Firstly, this is a snapshot of one period – though the ratio has been falling dramatically since last summer. Secondly, the ratio tends to fall when we are feeling optimistic and rise when we fear hard times ahead.
So it peaked after the credit crunch and before that in the recessions at the beginning of the 1980s and 1990s.
Economists appear to be blaming the depreciation in sterling, falls in real wages and dipping into savings to maintain lifestyle.
I would add to that cars bought on finance packages. In the 12 months to March, 86.5 per cent of private new cars were bought on finance, moving the total value of consumer car finance to £3.6bn.
Those monthly payments all have to be met out of household income.
I would also suggest politicians carry some of the blame. All we hear on the news every night is more boring tales of their navel-gazing and petty power struggles.
It is enough to make even the most dedicated saver decide to blow their pension on a Lamborghini.
Defending freedoms
Talking of pensions, Steve Webb put up a robust and wonderfully coherent defence of pension freedoms recently.
The tone of the comments from the Royal London man, who designed the freedoms while pensions minister, showed his frustration at daft comments and reactions to the recent FCA report on the subject.
The FCA report found that about 30 per cent of people taking money from their pension had not sought advice.
That may sound awful until you read that of those who had withdrawn all of their money, 60 per cent of the pots were less than £10,000.
As Mr Webb said: “What can you do with an £8,000 pension pot?” Previously some would have been forced to buy a pitiful annuity.
As I have always argued: it is our money, we have saved it, we should be allowed to do with it as we please.
Tony Hazell writes for the Daily Mail's Money Mail column
