The Financial Conduct Authority's interim report raises an interesting question - who should be responsible for identifying if platform customers are still receiving ongoing advice?
The report suggests new rules would require providers to annually check an advised customer account, and should they fail to see any ‘activity’ – which is as yet undefined by the FCA – the provider cease any ongoing adviser charge schedule and treat the customer as an orphan going forward.
Should my bank be responsible for checking that I’m getting value from my Netflix, Amazon Prime, Virgin Media or Spotify subscriptions?
If I fail to use a service for an extended period should it be their responsibility to cancel the direct debit paying for it? In this instance I might not care, but my kids would be absolutely livid.
I guess this drives to the point. In assessing any evidence it is essential to add context.
My subscriptions are used by my family with my full knowledge – and, in my view, a price worth paying to keep the peace.
Similarly, a fee could be coming from a seemingly inactive platform account for good reason.
I do recognise the challenge facing the FCA. Regulating the advised market with over 14,000 registered individuals who, in turn, look after millions of clients is a significant challenge.
Trying to cultivate positive behaviours and customer outcomes through the 30-odd platform providers has to make sense. In fact, I would suggest that much of the positive change we have seen in the last decade has been implemented in this way; advisers adapting to regulatory change enabled by advancing platform technology.
The move to fees, central investment processes and transparency are all good examples.
However, to maintain this positive collaboration it is important that platforms are not asked to police advisers. Helping advisers to demonstrate their compliance should be the limit of the platform’s role.
In considering whether the suggested monitoring (which has been deployed in Australia) will help customers it is important to consider any unanticipated consequences.
If an investment transaction is the measure of activity, will this lead to more advisers attempting to time the market in an effort to add value? Also, will a rogue adviser just ensure they switch at least one fund per client in a measured period to ‘tick the box’, regardless of whether they’re providing a good level of ongoing advice or that the switch was in the client’s best interests?
In general, platforms host long-term saving and investment solutions. Therefore it might be wholly reasonable for a customer’s platform record to remain unchanged for a year or more despite receiving regular ongoing advice services.
Also what role does the customer play here? The FCA needs to acknowledge the individual’s choice and personal responsibility for any ongoing contractual payment they enter into.