The FCA has highlighted model portfolios as a particular area of concern in its newly launched study of the platform market.
The regulator, which today (July 17) published its terms of reference for the platform market study, said the wide-ranging review would look at whether products offered by platforms "meet investor expectations".
In a carry-over from the recent asset management market study, the FCA said it would conduct further analysis on fund ratings. Agencies were initially marked as an area of concern in the fund firm probe but were left untouched in the regulator's final conclusions.
However, it will now look at how rating agencies provide their services to asset managers, and how this affects the way platforms highlight investment funds.
The terms of reference have suggested the latest study will go further than initially expected. A potential focus on platforms arose from the initial findings of the regulator's asset management market study, after some respondents suggested platforms may hamper fund firm competition.
As well as covering the £600bn platform industry, the FCA said advisers, wealth managers and other distributors would also be studied - given the fact their services can complement or compete with platform offerings.
On model portfolios, the FCA said platforms were increasingly competing with one other to offer investment solutions. Of the 41 platforms in scope, it said almost half provide such products.
"As these investment solutions are likely to form a core part of a firm’s offer to retail investors and financial advisers, we will analyse the extent to which these solutions offer value for money."
"We will assess whether platforms’ risk profiling tools match investors to a portfolio suited to their risk level, how risk profiles are created, what the asset allocations are for different model portfolios, and how investors are assigned to portfolios across platforms. Our findings will then be matched against investors’ understanding of the process," the regulator added.
The FCA also said it wanted to understand the impact fund ratings had on a platform's ability to construct tools for advisers.
"We will assess the commercial relationships that exist between advisers, product providers and platforms...[and] how reliant platforms are on third-party rating agencies and how conflicts of interest are addressed," the FCA said.
The FCA is accepting feedback on its terms of reference until September and said it would report its final conclusions in around 12 months' time.
The study will also include elements of discretionary wealth manager offerings - which the regulator said could be considered an equivalent to platforms in some cases.
"This includes firms that offer access to retail investment products through an online portal and investment solution which provide similar outcomes to those offered by a platform. We want to understand if platforms face competition from other distributors and whether issues in the platforms sectors are more widely applicable," the FCA said.