NucleusJul 16 2018

FCA warns on adviser-owned platforms

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FCA warns on adviser-owned platforms

The Financial Conduct Authority (FCA) has said it regards adviser-owned platforms as an area of concern under its inducement rules.

In its platform market study, released this morning, the regulator highlighted the white labelling of platforms, adviser training courses and portfolio management tools as examples of non-monetary inducements advisers receive but where the benefit to clients is less obvious.

But the regulator also expressed concern about what it called "self-created" conflicts of interest, and singled out advisers having an equity stake in a platform as an area of concern.

Transact and Nucleus are recent examples of platforms in which are or were owned by advisers.

The former of these floated on the London Stock Exchange earlier this year, with the latter set to join it in the coming months. 

Mike Barrett, of consultancy firm the Lang Cat, said this conflict of interest was "well known, mostly because the rivals of those firms have been highlighting it.

He said: "So advisers should be well aware of the need to justify it to clients. I remember when Nucleus were launching, a lot of advisers said they liked the proposition, but not the conflict of interest."

Mr Barrett added white labelling can range from literature being provided in the IFAs brand through to the entire site as seen by the end client having the IFA’s branding.

He said some platforms carry an explicit charge for this while others do not, which is what has raised the hackles of the regulator.

The Chartered Institute for Securities and Investment (CISI) cautioned against banning all inducements, saying it may lead to platforms feeling they cannot take an adviser for lunch, and that will reduce the level of collaboration in the industry, and that is detrimental to the end client.

Nucleus has been approached for comment.

david.thorpe@ft.com