The FCA announced last week it will launch an inquiry into whether investment platforms are good value for money for end clients.
However, Vasilieff, head of Bath-based investment platform Novia Financial, told International Adviser the review risked “asking lots of questions without suggesting any answers”.
It should instead focus on improving market competition by banning exit fees if it wants to yield positive results for the end client, he told IA in an exclusive interview.
Background
The FCA plans to look at how investment platforms, including those offered by life companies, compete in practice and whether they use their bargaining power to get investors a good deal.
Consumers are increasingly turning to platforms as a way of managing their investments, and the platform market has grown steadily in recent years, with assets under administration going up from £108bn in 2008 to £500bn ($649bn, €562bn) in 2016, the FCA said.
IA canvassed Vasilieff about the FCA inquiry, which is expected to report its interim findings by summer 2018. The regulator’s deadline for feedback is 8 September.
What do you make of the review the FCA has launched to investigate the investment platforms industry?
It looks as if they are asking lots of questions without suggesting any answers yet, and in fact some of their views are contradictory. We are not concerned, I don’t think that a lot will come out of it to affect platforms operating like Novia.
I don’t think there are any serious problems in the market which need to be fixed on the side of advisers and product providers. Platforms are already under heavy price pressure and this feels like an approach that’s looking for a problem to fix, rather than one that’s saying: “Here’s a problem, let’s fix it.”
One of the questions the FCA aims to answer is whether platforms are good value for money for the end customer, or whether they work mostly in the interest of the adviser?
There is no other market I can think of where the regulator comes in and says: “We will decide what good value for money is”, and different investors have different views of what good value for money is.
I think it’s a red herring of an argument. Ultimately, what platforms do is bringing efficiency to the adviser market and the entire value chain, at the end of which sits the end buyer.
Back in November, the FCA anticipated it wanted to get a closer look into whether retail investors fully benefit from the potential buyer power available to platforms. “Investors can be charged a range of different platform fees, potentially making it difficult to understand the full cost of investment”, it said in a statement.
First of all, let’s clarify. There are two markets: the adviser market and the direct to consumer market. So that’s right, it can be quite difficult to discern costs, but we certainly try to keep the cost structure simple.
Generally, we charge a platform fee and that is it. We don’t have invisible charges. Some other businesses charge a lower annual fee, but that’s on top of other fees. So yes it is difficult, but actually, in the intermediated market the adviser acts as a proxy for the consumer and it’s them who decide. Platform clients are much more in tune with what the platforms charge.
