On 17 July, the FCA published the Terms of Reference (“ToR”) for their latest study on investment platform market (the “Study”). The 5 broad topics being considered to assess whether competition between investment platforms work in the interest of consumers, are set out below.

The FCA is encouraging feedback on the topics by 8 September 2017. You can submit your feedback via email or by post (to Kate Blatchford, Competition & Economics Division, Financial Conduct Authority, 25 The North Colonnade, London E14 5HS). The FCA aims to publish an interim report on the Study by summer 2018.

The aim of the Study is to investigate primarily whether:

  • platforms help investors make good investment decisions;
  • whether competition amongst platforms is encouraging them to offer investment solutions which provide investors value for money; and
  • whether their interactions with other service providers (e.g. advisers, asset managers, fund ratings providers and other platforms) work in the interests of investors.

The scope of the Study will cover:

  • platforms;
  • financial advisers, wealth managers and distributors who use intermediated platforms to access other retail investment providers on behalf of their clients;
  • product and wrapper providers who use platforms to distribute their own products;
  • outsourced platform services e.g. technology providers; and
  • fund ratings and data providers whose information platforms use and distribute.
Topics Summary
Barriers to entry and expansion The FCA intend to consider whether platforms are competing on price and quality and if not, why. Consequently, if there are barriers to entry or expansion – what are the reasons for this.

Furthermore, the FCA will consider how specific regulations which apply to investment platforms but not to other firms which offer a similar service affects the platform’s ability to compete.

Commercial relationships This requires looking into the way platforms negotiate with product providers and how that may affect the outcomes consumers receive from their investment products, the products the platforms promote, the choices investors make and the value for money they receive.

Business models and platform profitability The way that platforms generate revenue is by charging a fixed fee or percentage based fee on the assets they administer on behalf of investors, interest the consumer forgoes on cash, trading charges and potentially offering additional services such as advice, or discretionary management of the portfolio. The FCA want to look into how this affects the factors over which platforms compete i.e. which particular services and products contribute to the platform’s profitability and how this differs between different business models.

The impact of advisers Financial advisers may either recommend or choose a platform on behalf of their clients. The FCA want to understand how this affects the competitive dynamic between platforms i.e. what factors do advisers consider when choosing a platform and whether platforms consider the end investor when competing to win business from advisers or do they just offer tools and services which meet the needs of the adviser instead of the end investor.

Consumer preferences and behaviour The FCA will assess whether there are barriers preventing firms from providing consumers with the necessary information, guidance and advice they need to make informed decisions along with whether platforms lead consumers to make certain choices and any barriers there may be on the consumer when considering switching platform provider.


To access the ToR for the Study, please click here.

For more information, and any guidance or advice on investment platforms, Cleveland & Co, your External in-house counsel, are here to help.