Financial Conduct Authority publishes terms of reference for investment platforms market study

The UK Financial Conduct Authority (FCA) has today published terms of reference for its investment platforms market study. This new study follows the FCA’s asset management market study that was published earlier this summer.

The FCA defines a platform service as a service that involves arranging, safeguarding, or administering investments and distributing retail investment products that are offered to retail clients by multiple product providers. Retail investors and their financial advisers use these platforms to access information and tools to inform their investment choices, and to execute, review and potentially change their investments.

The new market study will focus on investment platforms, but the FCA recognises that these platforms are part of a wider distribution landscape which also includes wealth managers, insurance firms, banks and asset managers with a direct route to market. The FCA says its analysis will take the wider distribution landscape into account.

In order to assess whether competition between investment platforms works in the interest of customers, the new market study will explore a broad range of topics including barriers to entry and expansion, commercial relationships between platforms and investment managers, business models, the impact of platforms on advisers, and customer preferences.  A particular focus is expected to be given to the question of whether customers face actual or perceived barriers when switching from one platform to another.

Antti Lemberg, from Frontier’s Financial Services team, says: “Investment platforms have increased over fivefold in size in the past ten years.  As a growing number of consumers use platforms to manage their long-term savings, it is understandable that the FCA wants to ensure that competition is working for the benefit of customers.  The industry has already started to explore how to make switching between platforms easier for customers. Here, existing automated switching services like the current account switching service and Cash ISA transfer services can offer useful lessons.”

Frontier has advised clients in relation to all of the FCA’s market studies, and was involved in the development of both the Current Account Switching Service and the Cash ISA Transfer Service.

For more information, please contact Saskia Nett on s.nett@frontier-economics.com, or call +44 (0)20 7031 7000.

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Related Sectors:
Retail and consumer
Financial Services
Related Disciplines:
Behavioural Economics
Competition
Strategy
Regulation