Monday, 17 July 2017 07:15

FCA probes if clients ‘harmed’ by adviser platform choices

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The FCA will investigate if consumers are being harmed by a mismatch between the interests of the adviser and client when advisers select a platform.

The regulator will scrutinise the factors which determine why advisers choose a platform on behalf of their clients.

These were among the key points from today’s release of the FCA Investment Platforms Market Study Terms of Reference.

Read more here.

The FCA document stated: “To win business from advisers, platforms may compete by offering tools and services which meet the needs of the adviser. Competition may be working effectively if this dynamic results in advisers being able to offer better or more efficient services to investors.

“However, consumer harm may arise if the interests and choices of the adviser and investor are not aligned.

“To understand whether advised platforms compete in the interests of the end investor we will assess the factors which determine why advisers choose a platform on behalf of their clients, the access platforms allow consumers, any restrictions they impose and the reasons for these.

“We will also consider the typical use consumers make of advised platforms which will include how advised platforms deal with consumers who no longer have an adviser.”

Financial advisers may “determine the extent to which consumers receive the benefits of competition between platforms”, the FCA said.

A question that officials will attempt to answer during the investigation is:

Do advisers have a positive impact on the cost/quality of the platform and are these benefits passed through to investors?

The FCA report stated: “Advisers choose platforms on behalf of their clients who in turn pay for the platform service. Advisers may therefore have bargaining power and influence regarding platform fees and services, which in turn may be passed onto investors if competition is working effectively.

“We will consider how advisers select and use platforms, how platforms compete to win business from financial advisers and the competitive pressure advisers are able to exert on platforms. This will include adviser firms which white label a platform, or use their own platform.

“We want to assess the impact advisers have on platform costs and quality, understand whether the benefits advisers secure from their platform are passed onto investors and how use of a platform has affected adviser charges.

“Considering these factors should enable us to draw conclusions as to the impact adviser firms are having on the platform market, how platforms tailor their offering to advisers and whether this is resulting in effective competition in the interests of consumers.”

Last modified on Monday, 17 July 2017 10:27
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