The measures from the regulator aim to address concerns for five particular groups of consumers.
The British Financial Conduct Authority (FCA) announced on Monday that it is planning to implement new measures to protect consumers in the investment platform market. The measures are a result of the regulator’s interim report on the industry, which identified concerns regarding how investment platforms compete for five groups of consumers.
The watchdog’s proposal includes remedies to help strengthen the extent to which platforms can drive competition between asset managers and measures to increase the ease in which investors and advisers can switch between platforms. Furthermore, the changes aim to tackle price discrimination between orphan and existing clients as well as alert customers who are holding large cash balances.
Groups of concern
Competition between investment platforms has been one of the main protections for consumers. Although this has been working well overall in the industry, the UK regulator is concerned about the following five groups of traders:
Traders who may benefit from switching, however, find it difficult or costly to do so;
Investors who use direct-to-consumer (D2C) platforms who want to choose on the basis of price;
Consumers who use model portfolios;
Customers with large cash balances who may not be aware they are missing out on investment returns;
Orphan clients, which are consumers who previously were advised on their trades, but now have no relationship with a financial advisor.
According to the statement, the regulator found that approximately seven percent of traders tried to switch platforms, but were unable to do so. This is due to significant barriers, which limits the pressure on platforms to provide continued value to money.
For D2C platforms, the regulator found that fees were hard to understand and compare, which made it harder for consumers to find cheaper platforms.
For investors who use model portfolios, the FCA found they can be misleading in regards to the risks they may face. This is due to many portfolios using difficult or similar language that does not allow for easy comparison. This can expose the investor exposed to significantly different underlying assets and Volatility in returns.
The report also found that orphan clients have limited ability to access and alter their investments on an adviser platform. This means they are essentially paying for functionality that they can’t use.
Growth of investment platform industry
The measures follow the rapid growth of the investment platform market and aim to address the concerns before they get bigger. This is especially important as investors are becoming more dependent on these platforms to manage their investments, the statement says.
Since 2013 the market has almost doubled in size, and during the same period, 2.2 million new customer accounts were open. Currently, the industry has £500 billion of assets under management.
Commenting on the proposed measures, Christopher Woolard, Executive Director of Strategy and Competition at the FCA said: "this is a market that has seen significant growth in the past five years with more customers than ever deciding to use a platform to manage their money.
“We know that competition is working well for many but it is important that the problems we have identified are addressed so that consumers don't lose out. We have outlined a package of measures today to address the issues we have found, but we also want to see the industry step up, making it easier for consumers to transfer from one platform to another."
According to the statement, the British watchdog understands that the industry is currently taking steps to allow consumers to easily shop around on the basis of price. This is referring to the implementation of the MiFID IIRegulation. As a result, the FCA will assess the industry’s progress in these areas before deciding if it will implement additional remedies.
The FCA will publish its final conclusions in early 2019. Before then, the regulator is seeking feedback on its initial findings and proposed measures.
The British Financial Conduct Authority (FCA) announced on Monday that it is planning to implement new measures to protect consumers in the investment platform market. The measures are a result of the regulator’s interim report on the industry, which identified concerns regarding how investment platforms compete for five groups of consumers.
The watchdog’s proposal includes remedies to help strengthen the extent to which platforms can drive competition between asset managers and measures to increase the ease in which investors and advisers can switch between platforms. Furthermore, the changes aim to tackle price discrimination between orphan and existing clients as well as alert customers who are holding large cash balances.
Groups of concern
Competition between investment platforms has been one of the main protections for consumers. Although this has been working well overall in the industry, the UK regulator is concerned about the following five groups of traders:
Traders who may benefit from switching, however, find it difficult or costly to do so;
Investors who use direct-to-consumer (D2C) platforms who want to choose on the basis of price;
Consumers who use model portfolios;
Customers with large cash balances who may not be aware they are missing out on investment returns;
Orphan clients, which are consumers who previously were advised on their trades, but now have no relationship with a financial advisor.
According to the statement, the regulator found that approximately seven percent of traders tried to switch platforms, but were unable to do so. This is due to significant barriers, which limits the pressure on platforms to provide continued value to money.
For D2C platforms, the regulator found that fees were hard to understand and compare, which made it harder for consumers to find cheaper platforms.
For investors who use model portfolios, the FCA found they can be misleading in regards to the risks they may face. This is due to many portfolios using difficult or similar language that does not allow for easy comparison. This can expose the investor exposed to significantly different underlying assets and Volatility in returns.
The report also found that orphan clients have limited ability to access and alter their investments on an adviser platform. This means they are essentially paying for functionality that they can’t use.
Growth of investment platform industry
The measures follow the rapid growth of the investment platform market and aim to address the concerns before they get bigger. This is especially important as investors are becoming more dependent on these platforms to manage their investments, the statement says.
Since 2013 the market has almost doubled in size, and during the same period, 2.2 million new customer accounts were open. Currently, the industry has £500 billion of assets under management.
Commenting on the proposed measures, Christopher Woolard, Executive Director of Strategy and Competition at the FCA said: "this is a market that has seen significant growth in the past five years with more customers than ever deciding to use a platform to manage their money.
“We know that competition is working well for many but it is important that the problems we have identified are addressed so that consumers don't lose out. We have outlined a package of measures today to address the issues we have found, but we also want to see the industry step up, making it easier for consumers to transfer from one platform to another."
According to the statement, the British watchdog understands that the industry is currently taking steps to allow consumers to easily shop around on the basis of price. This is referring to the implementation of the MiFID IIRegulation. As a result, the FCA will assess the industry’s progress in these areas before deciding if it will implement additional remedies.
The FCA will publish its final conclusions in early 2019. Before then, the regulator is seeking feedback on its initial findings and proposed measures.
Devexperts Teams Up with nuam Exchange to Boost Equity and Derivatives Trading
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
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#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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