Platforms should be forced to be more transparent on their charges, AJ Bell has said in response to the Financial Conduct Authority’s (FCA) platform market study interim report
Today (21 September 2018) is the deadline for platforms to respond to the FCA and AJ Bell called for the full financial disclosure of annual platform charges, regulatory guidance on bulk platform charges, abolishing the ban on cash rebates and more transparency for model portfolio disclosures.
The company has said the watchdog should force platforms to publish the amount of revenue they make in a year from assets under administration, to reduce the complexity around charges.
Andy Bell, chief executive of AJ Bell, said: "Revenue per pound of assets under management cuts through the complexity created by different platform charging structures and shows people the level of charges each platform levies per pound invested.
"I’d like to see a requirement for platforms to publish this figure prominently on their website as pounds of revenue per £100,000 of investment, rather than a basis points measure.
"Based on the 2016 numbers from the interim report that would show that platform fees per £100,000 ranged from £220 per year to £540 and people could see where their platform sits on the scale."
In its response, AJ Bell also called for the FCA to impose a requirement for platforms to have a calculator on their website that shows su customers the annual charges that potential and existing customers will pay.
"Simple online calculators like this would allow a meaningful comparison of charges with other platforms to be undertaken, before accounts are opened,” Mr Bell said.
In the interim report of the regulator's platform market study, published in July the FCA decried the fact advisers often left existing investments on more expensive platforms but it found switching platforms could take up to 15 hours of an advice firm's time.
Mr Bell said financial advisers were being put off from making bulk transfers due individual suitability requirements and he urged the FCA to issue guidance on the expectations of advisers when clients are looking to switch platforms.
"Many advisers are put off moving clients in bulk because of the individual suitability requirements, even where it is clear a better-value option is available to a particular cohort of an adviser’s clients," Mr Bell said.
"The switch between platforms can normally be achieved without any change to the underlying tax wrapper(s) or investments. Guidance from the regulator on what it expects of advisers in these situations could make this process easier for advisers, improve competition in the market and result in increased value for money for those involved.
"Ideally this would pave the way for a simplified suitability process that just focused on those differences between the ceding and receiving investment platforms such as charges, financial security and functionality.”
The company also called for a lifting of the ban on cash rebates and more transparency for model portfolio disclosures.
"Moving back to a single retail share class for each fund, with discounts applied in the form of cash rebates payable for the benefit of customers (rather than the platform), would make the process of re-registering between platforms significantly simpler," Mr Bell said.
"This would also make it easier for platforms to negotiate discounts for their customers, in the form of cash rebates paid directly back to their platform cash account, thereby addressing the FCA’s concern that platforms are not using their scale to deliver better value for investors."
"The issues identified in the interim report around the consistency of labeling and risk descriptions of model portfolios have been an issue for some time, but the solution is not to impose greater degrees of commoditisation into a market which has become increasingly more commoditised over time.
"This will stifle innovation, reduce customer choice and is likely to create unintended barriers for new market entrants as price becomes the only means by which products and services may be differentiated."
The watchdog will be publishing its final platform market study report in the first quarter of 2019.
rosie.quigley@ft.com
