Investment platforms – which are one stop shops for buying and managing your investments, are to be investigated by the Financial Conduct Authority to see if investors are getting a fair deal.
Q. What are investment platforms?
A. Investment platforms let you buy investments, such as stocks and shares ISAs, SIPPs (self invested personal pensions) and shares, and hold investments from different companies all together. It means that you can see all the investments you have with that platform in one place, rather than having different accounts with different companies you invest through.
Investment platforms have been around for over well a decade and, in the early days, were called fund supermarkets. They’ve become much more popular in recent years, and currently £500 billion is invested through them (that’s compared to just over £100 billion in 2008).
Q. Who operate investment platforms?
A. A number of companies and investment providers operate platforms. So, for example, Hargreaves Lansdown, Nutmeg, AJ Bell, Interactive Investor, Fidelity and The Share Centre are all investment platforms.
Q. Why is the Financial Conduct Authority investigating investment platforms?
A. Technically, the FCA isn’t investigating investment platforms. What it’s doing is carrying out a market study. An investigation is a more serious affair altogether. Either way, it’s not 100% happy with the way the investment platforms operate or it wouldn’t waste its time looking at them.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said: “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.”
Q. What is the FCA going to be looking at?
A. The Financial Conduct Authority will look at a number of issues, including:
- Whether platforms help their customers make good investment decisions;
- Whether platforms offer customers value for money;
- How the platforms compete against each other and whether they use their bargaining power to get their customers a good deal;
- Whether the relationships these platforms have with other platforms, independent financial advisers, asset managers (companies that manage funds we invest in) and fund ratings companies (as the name implies, companies that rate investment funds), works in the interests of customers.
The FCA will be investigating/studying online investment platforms and companies that sell investments to customers via an online portal (even if they don’t brand themselves as an investment platform), financial advisers and wealth managers who use these platforms on behalf of their clients, companies that use investment platforms to sell their products for them, technology companies that supply services to the platforms and fund ratings providers, whose information is often used by the investment platforms.
The study will also look at retail investors (that’s investors like you and me, as opposed to the large pension funds).
Q. Can I get involved?
A. If you use an investment platform and you’d like to tell the regulator what you think, you have until September 8th to contact the FCA. You can email them at: Investmentplatformsmarketstudy@fca.org.uk or write to Kate Blatchford, Competition & Economics Division, Financial Conduct Authority, 25 The North Colonnade, London E14 5HS. You can read more about the FCA’s study into investment platforms on its website.
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