Platforms will have to deal with an increase in operational risk as the market grows.
Nucleus chief executive David Ferguson said the regulator’s view of operational risk should not be underestimated if the sector goes from £100bn to £;500bn over the next five years.
He said: “The risk of losing money is tiny but if you are trading £1bn a day on your platform then there is not inconsiderable operational risk. If you do not have the capital to support that risk you are going to struggle.”
Fidelity head of UK fund partners Ed Dymott said: “The FSA has recognised that platforms are central to the future of the market so capital adequacy levels are going to increase significantly.”
Skandia platform marketing manager Jeremy Mugridge predicted that some of the players entering the market may not be able to keep up with established providers. He said: “In terms of technology, there are low barriers to entry but it is going to cost to develop your platform to keep pace with those who are investing significant funds.”