Fidelity: Capital requirements to increase for platforms
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Peter Hicks, the head of retail sales at Fidelity, says capital adequacy requirements for platforms will increase as they become a more significant part of the regulatory framework.
Hicks (pictured) says the Financial Services Authority (FSA) has realised that platforms are fundamental to making adviser charging work because of the cost, complexity and system developments involved.
But he adds: “If platforms are at the heart of one of the FSA’s big principles of RDR (retail distribution review), and the industry is relying on them so much, then the capital adequacy requirements could be expected to go up because the impact of a platform failing would be very great.
“It is not just about coming in now with a large pot of money”
Peter Hicks
“So you would expect platforms to be very well capitalised and it is not news to say that not every platform in the industry is well capitalised.”
Hicks says any new entrants to the platform space will struggle owing to high barriers to entry, including capital requirements. (article continues below)
He says: “We have seen new entrants come and go. But I think it will be very difficult for new entrants to enter the platform industry in the UK because the barriers to entry are now really quite high, especially in terms of that capital.
“The capital is substantial. It is not just about coming in now with a large pot of money. You need a large pot of money to come in, then another pot to spend the next year, then the next year, and so on.”
