The Model Office Blog

The FCA's Platform Probe

[fa icon="calendar"] Jul 19, 2018 4:34:52 PM / by Chris Davies

The FCA’s latest Platform ‘probe’ paper left many wondering if it really was worth the wait. No imminent platform price war is evident, yet this is another steppingstone in this new age of high regulatory accountability the industry now finds itself.

 Our last blog The FCA's new era of Accountability, showcased how important it is for firms to gain a clear understanding for how the Senior Managers and Certification regime (SM&CR) effects them across issues such as roles responsibilities, risk management, delegation and much more. This platform paper also highlights the issues surrounding:

  1. Inducements – Where some advisers use services including the provision of some adviser education and training courses, white labelling, and bulk rebalancing and model portfolio management tools, which are likely to benefit advisers but not necessarily their clients. Some of these services are likely to be so-called non-monetary benefits, so the FCA stated they are likely to be caught by the regulator’s inducement rules. So advisers now need to demonstrate that these benefits are acceptable minor non-monetary benefits, as they enhance the quality of the client service and not impair compliance with COBS 2.3.1to act in their client’s best interests
  1. Adviser charging – Platforms need to do more work on transparency of fund charges and how this can impact adviser charging and thus showcase whether the client is receiving good value for money
  2. In-specie transfer – With open banking, fun re-registration and Block chain already with us, The FCA want platforms to offer client non-complex and easy transfers where necessary. This with a focus on publishing transfer times and push for a ban on exit fees, will no doubt bring more flexibility and competition to the sector once available
  3. Adviser firm relationships – Advisers have become a main distribution influence for platforms and thus with The FCA focus on clients potentially missing out by holding too much cash in their investment accounts (no interest and yes fees charged) this may nudge advisers to provide suitable advice in this area
  4. Price discrimination – The FCA estimates that around 10,000 orphaned clients (no adviser relationship) are currently paying extra fees (£1.2M pa) So platforms will potentially need to offer differing price structures for orphaned and existing clients and switch orphaned clients to a more appropriate proposition

So although no big splash was evident with this paper, we are seeing the continued momentum for accountability across all market participants in the retail finance service industry. This means opportunity for those adviser firms who operate professionally and with integrity, they will be able to place pressure on platforms to comply and compete and thus enable more transparent and lower charging, flexibility for switching whilst ensuring they’re acting in their clients best interests.

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Topics: Financial regulation, Financial business development, fintech, regtech, Risk management, practice management, FCA, advice, HMT, suitability, FAWG, FAMR, Fitbit, MiFIDII, Data, GDPR, Chatbot, Culture, Enforcement, supervision, audit, Conduct, AI, Risk,, Accountability, Platforms

Chris Davies

Written by Chris Davies

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