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Wealth managers brought into FCA platform market study

Wealth managers brought into FCA platform market study

 Wealth managers are likely to be included in the Financial Conduct Authority's (FCA) study into the £500 billion platform market. 

The watchdog has launched its study into the market, which was flagged in its final review of the asset management industry published last month in which it said it would look at vertical integration

In the new study, the FCA said it defines ‘platforms’ broadly, looking at both investment platforms and firms that provide similar services by allowing investors or their advisers to access retail investment products through an online portal.

This is likely to see wealth and a fund managers and other distributors brought into the net. 

'To assess whether issues that apply to platform service providers also apply more broadly across the distribution landscape and how much competition platforms face from wealth managers and other distributors, we will include a sample of firms that offer a similar service to consumers using a platform,' the regulator said.

'We are likely to include a sample of wealth managers, insurance firms, asset managers with a direct route to market and discretionary fund managers which offer similar services despite not being captured by
the FCA’s platform definition.'

The FCA deemed it important to review platforms  given their rise in use by consumers and financial advisers. The market has steadily grown over the last eight years, with assets under administration (AUA) for both adviser and direct platforms increasing from £108 billion in 2008 to £500 billion in 2016.

The watchdog noted that many platforms offer investors and their advisers a range of information and tools to help them make investment decisions and some also offer their own investment products.

As part of the study, the FCA will explore whether platforms help investors make good investment decisions and whether their investment solutions offer investors value for money. 

In principle, platforms are designed to allow retail investors to pool their money and achieve better investment returns. The FCA will look at how platforms compete in practice and whether they use their bargaining power to get investors a good deal.

To provide investors access to retail investment products and information about these products, platforms interact with other platforms, advisers, asset managers and fund ratings providers. The FCA will assess whether these relationships work in the interests of investors.

FCA director of strategy and competition Christopher Woolard (pictured) said in a statement: 'With the increasing use of platforms, and the issues raised by our previous work, we want to assess whether competition between platforms is working in the interest of consumers.

'Platforms have the potential to generate significant benefits for consumers and we want to ensure consumers are receiving these benefits in practice.']

Firms have until 8 September to offer feedback. The FCA aims to publish an interim report by summer 2018, which will set out preliminary conclusions and any potential remedies to address concerns.

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