09 August 2017

The Financial Conduct Authority (FCA) launched the investment platforms market study on 17 July 2017 with the publication of its terms of reference. The study was announced in the FCA Business Plan 2017/2018, and follows the FCA’s recently concluded asset management market study during which the FCA identified potential competition issues in the investment platforms sector. The FCA will now be conducting further work to assess the extent to which these issues may be causing consumer harm.

What is the scope of the study?

Investment platforms are used by retail investors and their financial advisors to access information and tools to inform their investment choices, as well as execute, review and potentially change their investments. The FCA notes that the platform market has grown steadily with assets under administration for both adviser and direct platforms rising from £108 billion in 2008 to £592 billion in 2016.

The FCA defines platforms broadly for the purposes of the study, which will cover:

  • platforms and other firms that offer access to retail investment products through an online portal
  • retail investors who access retail investment products through an online portal
  • intermediaries, including financial advisers and wealth managers who use intermediated platforms to access different retail investment providers on behalf of their clients
  • product and wrapper providers who use platforms to distribute their products
  • technology providers to whom platforms outsource services
  • fund ratings and data providers whose information platforms use and distribute.

Key areas of focus

The FCA will seek to assess:

  • whether platforms help investors make good investment decisions and offer investors value for money
  • how platforms compete in practice and whether they use their bargaining power to get investors a good deal
  • the relationships between investment platforms and other platforms, advisers, asset managers and fund ratings providers, and whether these work in the interests of investors.

In particular, the FCA will explore how platforms compete to win new and retain existing business, and will analyse the extent to which there is a typical distribution of price and quality in the platforms sector. The FCA will also consider barriers to entry and expansion, commercial relationships (including how platforms interact with other parts of the value chain), business models and profitability, the impact of advisers, and customer preferences and behaviour (including whether challenger platforms struggle to compete if customers face barriers to switching).

Comment and next steps

Executive Director of Strategy and Competition at the FCA, Christopher Woolard, commented that with the increasing use of platforms and the issues raised by its previous work, the FCA wants to assess whether competition between platforms is working in the interest of consumers, and that while platforms "have the potential to generate significant benefits for consumers”, the FCA wants “to ensure consumers are receiving these benefits in practice”.

The FCA is conducting the study using its Financial Services and Markets Act 2000 (FSMA) powers, rather than its powers under the Enterprise Act 2002, and as such will not be subject to a specific timetable to complete the study. The FCA intends to publish an interim report by the summer of 2018 which will set out its analysis, preliminary conclusions and where practicable and appropriate, possible remedies to address any concerns identified by the study.

Although the FCA is not formally consulting on its terms of reference, the FCA welcomes feedback by 8 September 2017. The next step will likely be information requests to market participants. Early and active engagement with the FCA will allow market participants to help inform the FCA’s initial views.

If you have any questions on the issues raised in this article, please contact Chris Worrall or your usual Burges Salmon lawyer.

This article was co-authored by Becky Ellis.

Key contact

Chris Worrall

Chris Worrall Partner

  • Head of Competition
  • Mergers and Acquisitions
  • Financial Services

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