Q: What were the key takeaways from the Financial Conduct Authority’s final report on platform providers?
The FCA undertook this study to investigate whether consumers were able to make informed decisions when choosing a platform and investments that best suit their needs.
The study also considered how competition was working when advisers are recommending platforms. The impact that platforms have on charges to investors was also explored, including any aspects that may impede platforms’ incentives, as well as the ability to negotiate on behalf of consumers.
The FCA concluded that:
• In general, the market was working well for advised and non-advised consumers.
• Platforms appear to help consumers and advisers make informed decisions, with platforms competing in the best interest of consumers.
• Platforms have appropriate policies and procedures for identifying orphan clients who may suffer harm if they are paying for advice they no longer receive.
However, the FCA found areas for further improvement, including:
• Shopping around between platforms.
It should be easier for consumers and advisers to shop around and switch between unit classes to better meet consumers’ demands and needs.
Fees and charges could be more readily available, prominent and clear to help consumers compare costs and shop around.
However, the FCA is aware that many companies may now have embedded the required changes in respect of cost and charges disclosure required under Mifid II. As a result, the FCA is not proposing any further regulatory intervention at this time.
• Switching platforms.
Exit fees, costs, time taken and the complexity of the process should not be barriers when consumers are looking to switch to a platform that may better suit their needs.
Improving the efficiency of the switching process remains a priority for the FCA. Star – a not-for-profit joint venture endorsed by the Transfers and Re-registration Industry Group – is in the process of implementing a framework to improve transfer times and customer communications. The FCA will review industry progress later in the year and will take further regulatory action in 2020, if required.
In addition, to reduce the barriers to switching, the FCA is consulting on measures to restrict exit fees and introducing a requirement for platforms to provide unit class conversions to support consumers’ requests.
Where advisers charge for switching, they should be prepared to demonstrate that any associated fees and charges are fair.
• Orphan clients.
Advisers should notify platforms when a relationship with a client has ended. Platforms should consider their broader propositions for orphan clients, including additional fees and charges. They should pay due regard to their interests and treat them fairly.
Don Scott is technical director at consultancy TCC