Can you remember what you were doing on 17 July 2017? If you work in platform land[1] chances are you were thumbing through the FCA’s Investment Platforms Market Study Terms of Reference paper, or more likely, reading our blog on said paper.

Fast forward 12 months, and here we are again. This time, it’s the Interim Report, together with eight annex documents (total page count of 384 pages if you are counting, and we are). Despite a year’s work and almost 400 pages of output, our first reaction is that very little has changed. Our second reaction is that, in a lot of ways, it’s a bit of a cop out.


Last year’s terms of reference posed two headline questions covering the topics to be explored. Firstly, How do platforms and similar firms compete on the price and quality of the services and products they offer and the products over which they have influence?’. Secondly, Do platform and similar firms investment solutions offer investors value for money?. Sadly, neither of these questions comes close to being answered in the interim report.


What we have got are five groups of consumers for whom competition between platforms is not working well.

Competition between platforms is not working well for consumers:
  • Who would benefit from switching but can find it difficult.
  • Who are price sensitive but can find shopping around difficult.
  • Who use model portfolios. The risks and expected returns of model portfolios with similar risk labels are unclear and can lead to confusion about how much risk they are facing.
  • Who have large cash balances on direct platforms . They may not know they are missing out on investment returns and/or that they are paying charges.
  • Who no longer have an adviser and are still on an advised platform but may face higher charges and lower levels of service (referred to as ‘orphan clients’).


Before we get too negative it’s important to note that the supporting consumer research (conducted by NMG) shows that satisfaction with platforms is high, for both advised and non-advised customers. Breadth of investment choice rates particularly highly as an important factor, however charges carry the lowest satisfaction rating. It is also important to note that there are other influences on satisfaction levels beyond the platform functionality/services/charges, with investment performance and the adviser relationships understandably being at the forefront of customers’ minds.

The majority of these issues are more relevant to the direct-to-consumer (D2C) market. This is one area where we feel the study needs to take a more dichotomous approach, with separate studies for advised and direct markets. There are fundamental differences in structure between the two, not to mention the degree of influence the customer has on outcome. If it’s going to be effective, any new regulation must reflect these differences.

The interim report also fails to reflect that even within advised platform land[2] there are numerous differences between the various platform models. The impact of vertical integration is touched on but not fully explored. The terms of reference asked ‘Do the drivers of profitability affect firms incentives.and what are the implications for investors’? This question remains unanswered’.


Over the coming days we’ll publish a more detailed analysis of the findings and proposed remedies, but to briefly touch on the five points outlined above.

  1. Switching between platforms. The ease with which both advised and non-advised clients can move between platforms touches on lots of juicy subjects, such as exit fees, share classes and transfer times. The snappily titled Transfers and Re-Registration Working Group recently published a framework for improving things in this space, having been ‘encouraged’ to do so by the FCA. We expect this to be agreed and implemented at pace.
  2. Shopping around can be difficult. This one is aimed at the direct space, and whilst we would applaud moves to make it easier to shop around, in a world where 27% of direct consumers either don’t think they pay platform charges or don’t know, perhaps more work is needed on clarity of charges disclosure first.
  3. Model portfolios. That consumers using these model portfolios (mainly via D2C providers) may have the wrong idea about the risk/return levels they face also feels like an area in need of improved disclosure and clarity of information, rather than a standardised industry approach.
  4. Cash on platforms. We have mentioned this a number of times, the combination of low interest rates and platform charges means that if you are using a platform to ‘invest’ in cash, you are probably getting net negative returns as a result. It’s good to see this finally being recognised.
  5. Orphan clients. Platforms have always had a treating customers fairly obligation here, but it looks like the bar may be raised. The suggested requirement for platforms to check that clients are receiving an advised service could also be one to watch.

Overall this feels like a study in need of direction. We’re 12 months down with very little real progress to show for it. But, there is good news and here it is: there are very few signs of obvious consumer detriment. As the paper notes, ‘platform financial performance does not suggest widespread competition concerns in the market. We do not find sustained excess profitability and many platforms are loss-making’. This is in direct contrast to the Asset Management Market Study, with their average 36% profit margins, and it is noticeable that, piece of work moved much more rapidly than it’s smaller platform sibling. And finally, with c400 pages of research to digest we also know a lot more about the market than we did before.

As it stands, it looks like the FCA has bitten off more than it can chew with this work. There should be separate studies for advised and direct platforms, and the advised work needs to account for adjacent regulation such as MIFID II, the competition study for non-workplace pensions, the asset management market study and the ongoing DB transfer work.

The legend of Groundhog Day states that if the groundhog sees his shadow when he emerges from his long hibernation then a further six weeks of winter is ahead. In this case the FCA is casting a pretty long shadow having emerged from its lengthy period of studying the platform market. That the FCA’s main conclusion from a year-long study is that more work is needed doesn’t feel good enough to us. If the FCA has concerns with platforms it should tell us what they are and get on with doing something about them.


[1] Worst theme park ever.

[2] Second-worst theme park ever. Closed most weekends.