Financial Conduct Authority  

FCA warns of 'poor' practices ahead of D2C platform review

It has conducted two compliance reviews so far, one in February 2019 and one in February 2021.

The watchdog said these highlighted some failings in relation to cost information shown in marketing documents not matching the information in regulatory documents, and some firms using assumptions which make costs look as low as possible.

Fundscape's head of content, Martin Barnett, said it was no surprise that D2C platforms are being scrutinised.

"The FCA had said it would keep platforms under review and has renewed focus through its consumer investment strategy.

"What the FCA is asking platforms to fix is reasonable and to the benefit of the consumer. The changes required are themselves not rocket science – the FCA even outlines what they could look like under its good practice examples.

"Interactive tools and calculators can provide the required information before a consumer has to commit to any decision."

'Sheer volume of disclosures'

Advised platforms operate under the same regulatory requirement to produce annual cost and charges statements, but not all advised clients will have advice fees paid via the platform and clients will often have investments across more than one platform.

This means in practice, advised clients will look instead at the annual review the advice firm will send them instead.

While the regulator's latest research focuses on D2C platforms, some reckon advised platforms could also heed the FCA's warning.

Chief executive of platform consultancy NextWealth, Heather Hopkins, said being clear about costs was “critical” for the overall platform market. 

“Articulating this in a way that a customer sees the impact in pound and pence terms both now and in the future is also important,” she said.

“I worry that the signal can get lost in the noise given the sheer volume of disclosures. A financial adviser recently told me that she had to provide a client over 100 pages of various documents and disclosures for a fairly simple pension transfer. 

“If we expect customers to read and understand disclosures we need them to be short and to the point. My hope is that the Consumer Duty will usher in a new wave of reducing disclosure for disclosure's sake.”