Watchdog looks at measures to boost competition in investment platforms

● Concerns over barriers to switching ● Move to ban exit fees could be on cards

City watchdog the Financial Conduct Authority (FCA) has set out a series of changes aimed at improving competition in the £500 billion investment platform market.

Measures to make it easier for investors and advisers to switch between platforms and a ban on exit fees are among the key remedies proposed.

The FCA said that although it believes competition is working well for most consumers, it raised concerns about how platforms compete for particular groups of customers.

Theyincludethosewhowant to switch platform, those who use model portfolios or directto-consumer platforms, consumers with large cash balances and “orphan” clients – customers who were previously advised but no longer have any relationship with a financial adviser.

The FCA has pledged to help strengthentheextenttowhich platforms drive competition between asset managers, introduce measures to make it easier for investors and advisers to switch platforms, and promised to tackle price discrimination between orphan and existing clients. It is also proposing to ban exit fees after finding that around 7 per cent of all consumers tried to switch but failed to do so.

“The FCA found that barriers to switching are significant and could limit the pressure on platforms to provide continued value for money,” the regulator said.

Christopher Woolard, executive director of strategy and competition at the FCA, 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 FCA said it is proposing the measures due to the rapid growth in the market, which has almost doubled in size since 2013 with an extra 2.2 million customer accounts opened.

The FCA will publish its final conclusions about the market in early 2019.

Chris Hill, chief executive of Hargreaves Lansdown, which is one of the biggest platform providers along with the likes of Nutmeg and Interactive Investor, said the report recognises the “key role that investment platform services play in helping people to save and invest with confidence”.

“We welcome the FCA’S focus on switching and hope this accelerates the adoption of technology across the industry enabling people to switch more easily,” he said.