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Fund platforms working well – mostly

Data_screenFund platforms are on the whole working well, said the UK financial services regulator – but there were customers who platforms served less well due to a lack of competition.

The Financial Conduct Authority (FCA) has published an interim report on competition in the platform market that holds around £500 billion (€566 billion) in savings and investments for retail investors.

The regulator said there was a “mixed picture” and that the market “appears to be working well in many respects” but that it was difficult for consumers to shop around and choose a lower-cost platform.

These price-sensitive consumers were one of five groups of platform users that the FCA said it was concerned about because competition was not working well for them.

The other four groups and the problems they are said to face were:

  • consumers who wanted to switch platforms found it difficult;
  • risks and returns were unclear for customers in model portfolios with similar risk labels;
  • consumers had too much in cash and may not know they are missing out on returns;
  • and those who are no longer advised by financial advisers faced higher charges.

The FCA also found that platforms employed commercial practices that may restrict fund managers' incentives or ability to offer fund discounts to competitor platforms. This may reduce competition on fund discounts, the regulator said.

Andrew Strange, financial services director at PwC, said: "The FCA's research demonstrates a market broadly working in the interests of consumers and in an efficient way. The lack of specific remedies at this point, and a reliance on existing industry solutions, such as in-specie transfers, underlines this.”

Dan Mahony, director in EY’s life, pensions and health practice, said: “Robust competition in the investment platform market is helping to create good outcomes for consumers, and will only be improved by increased pricing transparency under MIFiD II.”

FCA research found that the platform market doubled between 2013 and 2017 from £250 billion to £500 billion of assets under administration, driven by rising markets and increasing levels of investment.

Direct-to-consumer platforms administer £189 billion, while adviser platforms administer £311 billion.

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