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Advisers warned of FCA platform due diligence crackdown

Advisers warned of FCA platform due diligence crackdown

Advisers have been warned that the Financial Conduct Authority is “turning up the heat” on platform due diligence.

Eric Armstrong, of Synaptic Software, told the Cisi financial planning conference today (5 October) that the regulator has visited 700 firms in its bid to crack down on this issue.

He said the FCA considers due diligence to be important for client outcomes.

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Mr Armstrong said: “They attribute poor outcomes to poor due diligence

“It is a serious thing. We know that because the FCA is turning up the heat and they have gone out and looked at a lot of firms.

“They are very specific about what poor research and due diligence looks like.”

Earlier this year the FCA published a thematic review into this issue, which found some “disappointing” practices.

These included firms no longer reviewing platform options available for clients because they were content with the service they received, and firms putting the service they received ahead of the service the client got.

Mr Armstrong said there were still “a lot of people” who were not doing the right levels of due diligence.

He said: “If you see the world of investment through the eyes of a single platform’s charges, are you falling foul of your regulatory requirements? 

“There is no precision over how to use a platform but you need to demonstrate suitability.”

Mr Armstrong said an adviser could in theory use just one platform but they would need to demonstrate suitability “at an individual level” for each client.

He also said advisers should take the financial position of each platform into account.

Mr Armstrong pointed to research which showed that while assets under administration were up, profitability has “nose dived”, with 14 out of 23 platforms reporting a profit last year, down from 17.

He said this was because platforms are squeezing their margins, with profit margins “far smaller than any normal business”.