As fans of a good box set will tell you, the trick is to keep the audience wanting more, but also to deliver enough excitement to keep them interested in the here and now. This is, I think, exactly what the government is doing with the Brexit parliamentary process, which appears to be somewhere between The Hunger Games, the Red Wedding scene from Game of Thrones and House of Cards.

Over recent years, the FCA’s competition arm (a kinder, gentler type of regulation) has knocked out a couple of pieces of work that, whilst they might not be at Game of Thrones levels of violence, certainly deserve your full attention.

First up we had the Asset Management Market Study. Jump back in our blog time-machine to 2017 if you fancy reading up on that one. Following on from that came the Investment Platform Market Study, and this morning we were treated to the final report.

First thing to note, as we have always said with these papers, is that these are competition studies. As well as supervising markets, the FCA now has a mandate to ensure they are operating effectively from a competitive point of view. A more competitive market leads to better outcomes, or at least that’s the theory. As such, anyone expecting huge disruptive changes to the platform market, then,  a) hasn’t been paying attention to the earlier work, and b) will be very disappointed.


So, what actually happened today? The FCA published two papers – a final report (more on that in a bit) and a consultation paper. It is the CP that contains the proposed changes, and in one case a bit of controversy…

First up in the CP are proposed rules to force the ceding platform to make it easier for clients to re-register to another provider. This is especially relevant where the platform holds a discounted (“superclean”) share class that the other provider might not have access to. In these instances it will be up to the ceding platform to convert the client, free of charge into a share class that can be re-registered. The CP has a few questions about this, and there are complexities to be worked through, however the FCA are proposing draft handbook text and an implementation date of 31st July 2020, so it’s clear they are expecting this one to happen.

The other part of the CP looks at exit fees. By now you will have seen all the headlines stating “FCA propose ban on platform exit fees”, and whilst this is certainly its proposal it doesn’t appear to be a done deal just yet. Compared to the share class proposal above, where there are final rules and an implementation date, the consultation for exit fees is still posing questions that feel more open to discussion. “If we introduce a ban on exit fees…” “To what extent might a ban mitigate barriers to switching?” To us, this sounds like there is still a debate to be had.

Central to this will be any potential read across to adjacent markets, and the CP doesn’t shy away from this. In theory they could have said that the IPMS was only looking at platforms and left it at that, but they have grasped the nettle of what a platform exit fee ban might mean for other similar services, not only asking “If we introduce a ban or cap on exit fees, should it apply to firms offering comparable services” but also “If your firm is a product manufacturer as well as a distributor as defined, what exit fees are applied within the products and services you offer to clients? If such fees exist, please provide a rationale for this charging model.“

 For a number of VI models, whilst not currently directly in scope for any change, it is clear the FCA is recognising that a ban in platform land has the potential to create an uneven playing field, and more importantly, be very confusing for investors if it doesn’t apply to everyone. It will be fascinating to see how this consultation plays out, and we would urge anyone with strong views either way to participate.


As tempting as it is to criticise the regulator for lack of action, realistically this is the only course it could take. It was never going to wade in and, for example, announce a ban on exit fees for life companies and all your favourite VI firms. You only need to cast your mind back to the “closed book blunder” to see just how badly this could have ended up. The only alternative would have been to duck the issue, and only implement a ban for platforms.

As regards exit fees themselves, the FCA was always going to ban them. The supporting consumer research shows a clear group of consumers for whom this will benefit. In our view exit fees are increasingly feeling like a relic from the past. There is just about still safety in numbers with several large providers having them in place, however this is something we expect to change fairly rapidly as firms decide to take the moral high ground and change their pricing accordingly. The sooner exit fees are consigned to history the better. If you’re a platform with these fees reading this and thinking ‘phew, we can keep them in a while longer’, then you should have a word with yourself and do the right thing before you’re made to.

Elsewhere, everything else you might have read about or thought would be included in the potential changes (orphan clients, advice process for moving platforms, cash on platforms etc) has been kicked into the long grass via the final report, although there are a number of repeated reminders that firms need to be compliant with loads of boring existing regulation such as inducements, disclosure, PROD and even in one reference, competition law. This is probably the one area where the report is lacking – if the FCA sees issues with non-compliance to existing rules it should take action.

And the next episode? Several mentions of an imminent “RDR and FAMR review”. There’s no scope for this yet, but it looks like it could be an epic, not only looking at advice, but also model portfolios and relationships between advisers and DFMs. I for one can’t wait

Finally, a note to our insight subscribers. We will be hosting a webinar next week to share more of our thoughts. Details will be circulated in the next few days.