The FCA has released its interim report for payment platforms. While it takes a softer line than many people expected there are still plenty of criticisms.
The study had been expected to make more serious criticisms of a sector that many feel has a lot of work to do. However, while the FCA did agree there were serious issues, their report claimed that competition was working – at least for the most part.
Among the most serious concerns are issues surrounding price and transparency. 30% of advised clients either did not think they paid anything for their platform or were uncertain about how much they did pay. The regulator also said that there was no reasonable explanation for the lack of transparency on part of the platforms.
It also raised concerns about how platforms, which were owned in full or in part by advisers, could offer reliable and impartial advice. The study highlighted three main areas of concern which could serve as non-financial inducements or lead to conflicts of interest including:
- The white labeling of platforms
- Adviser training courses
- Portfolio management tools
A growing market
The investment platform market is growing rapidly. Since 2013, it has doubled in size and has more than $500bn worth of assets under management worldwide. However, such is the pace of growth, that the FCA believes the time has come to address any problems now before they get worse. This study, therefore, is their attempt to make sure the platform market is working well.
Christopher Woolard, executive director of strategy and competition at the FCA said: “This is a market that has seen significant growth in the past five years with more customers than ever deciding to use a platform to manage their money. We know that competition is working well for many, but it is important that the problems we have identified are addressed so that consumers don’t lose out.”
What can be done?
The study makes a number of suggestions such as establishing a standard terminology or possibly banning exit fees to make it easier for customers to switch from one platform to another. They also issued a call for the industry to take more of a leading role in making sure it offers more competition for clients.
However, the prospects of any serious changes in the near future have receded. The FCA’s director of competition, Mary Starks, now says the regulator would hold off taking any action until firms have got to grips with MiFiDII.
The full report will be published later in the year. So far, though, the sector appears to have escaped stringing criticism that had been predicted.