The UK’s Financial Conduct Authority (FCA) has proposed several measures to improve competition in the £500bn investment platform sector, stating that the existing competition in the market is “not working as well as it should do”.
The measures are part of the regulator’s interim findings from a market study, which launched last year.
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The proposed measures aim to address the challenges of consumers who find it difficult to switch platforms due to exit fees. The interim report found nearly 7% of consumers trying to switch providers but failing to do so.
The watchdog also raised concerns about users of direct-to-consumer (D2C) platforms and model portfolios. The interim report found that the fees of these D2C platforms are hard to understand and compare for consumers, while the likely risk/returns on model portfolios were not clear.
The measures are also aimed to protect orphan clients, as well as help customers with large cash balances who the regulator said were missing out on interest on their balances.
In order to address these challenges, the FCA has proposed banning exit fees.
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By GlobalDataAmong the other proposed remedies include alerting customers holding large cash balances, helping consumers exposed to unexpected risks, and making investment platforms better suited for orphan clients.
FCA executive director of strategy and competition Christopher Woolard 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.
The final report on the market is expected to be published by early next year.
