The FCA is nearing the end of its platform market study, with sources close to the review debating whether the regulator could implement value for money rules similar to those for asset managers.
The regulator first set out the scope for its platform work last July, and was aiming to publish a report by summer this year, which could include ways to address any problems it finds.
It is understood that the review will not be released this month, but is on track to meet its summer deadline.
A number of sources tell Money Marketing that the frequency of meetings around the review has increased recently.
A source close to the review says that FCA staff are currently working through the data submitted by platforms and providers as part of the study, and that some of the same teams are being used as were used in the regulator’s asset management work.
Money Marketing understands data submitted to the FCA has now been returned to firms for them to sign off its use.
The FCA did make a connection with its asset management market work when it released the platform study, saying it “follows on from” that study, and that it was prompted both by the increasing use of platforms and “issues raised by our previous work”.
Commentators suggest that similar rules to those implemented in the FCA’s asset management market study could be applied to platforms by the FCA – for example around statements showing value for money, improving the number of independent directors on boards and making it easier for customers to switch into better-performing share classes.
The source says: “It makes sense to read across similar findings from the asset management study. A lot of people working on that piece of work are on the platform study as well. They’re trying to put some kind of responsibility on value for money, making sure that is the case.
“You could have the asset management study reinforced on the platform side – particularly what was on the consumer side of it. If there is a similar outcome, that the general public doesn’t understand percentage charging and isn’t able to work out value for money, then you could question a requirement on them to ensure that is the case.”
One major provider has responded to the review by criticising fund managers for not cutting discount deals with platforms unless they actively encourage flows into the manufacturer’s proposition.
A senior source at the provider says: “Platforms are trying to negotiate but they can’t always achieve that unless they control the flow of money to the fund manager.
“Fund managers are not always prepared to reduce charges even if the platform is delivering massive scale, if they are not pushing people towards the particular fund.”
As part of the asset management study value tests, fund groups are being asked to show how economies of scale benefit consumers. However, they suggest that there may be too much overlap with the asset management study for the FCA to place new value requirements on platforms.
They say: “To require independence and governance at platform level when you already have it at a product level, it can get very tangled. The FCA would think hard about this but if they want real value for money then they might look elsewhere.”
Money Marketing previously reported that asset managers, discretionary fund managers and other providers had fallen within the FCA’s data request as it gathered information across 150 questions and around 1,000 data points for the review.
It is understood that the review encompassed both quantitative data on wrapper and fund use, but also qualitative thoughts on business plans, strategies, and how the platform market would evolve in the coming years.
Another source close to the review says they do not expect any major disruption from it, with the FCA unlikely to go as far as introducing a measure like a price cap, which it opted against in the asset management study as well.
They say: “There’s been some successful lobbying here; with Mifid, Priips and GDPR all launching together, people are saying it’s about as much as we can handle.”
Altus Consulting senior consultant Ben Hammond says he could see the FCA following some of its recommendations from the asset management study for platforms.
On the potential for improving the number of independent board directors, he says there are already oversight rules and the senior managers regime that contribute to accountability of company bosses.
Hammond says the independent director requirement would be more relevant for vertically integrated firms that run their own funds and have a platform.
An FCA spokeswoman says the regulator cannot speculate on remedies before the results of the platform study are published.
Since the regulator released the review, competition between platforms has been thrust further into the spotlight by replatforming issues at major providers from Cofunds to Aviva and Quilter.