FCA: Platform study does not let fund managers off the hook

The FCA says it is not backing down on asset managers as it pursues a platform study at the same time.

In an update on its upcoming platform review, FCA head of wholesale and investments competition Robin Finer, who is heading up the project, said the regulator is “absolutely not” shifting the attention away from the asset management sector as some commentators had suggested.

In the final report into the asset management industry, which presented a series of remedies to solve issues around costs and charges and the independence of boards, the FCA announced it will consult the industry on further work to see what role platforms play in the value chain.

Many have argued this work could shift the FCA’s focus and give breathing space to asset managers.

Speaking at a Transparency Task Force panel today, Finer said: “We are absolutely not deflecting the attention away from asset managers onto platforms. We are absolutely continuing to do what we said we will do in the final report we published in June.

“The platform market study is not barrier of us to continue doing what we are doing on the asset management competition study. We are doing a range of things.”

Finer noted that work by the independent panel chaired by Chris Sier to come up with a clearer charging framework for institutional investors ,and a consultation on how fund benchmarks are used and how objectives of funds should be presented to consumers was still ongoing.

The FCA has also carried “some behavioural work” looking at how consumers understand and act on fees and charges, Finer said.

‘Diagnostic’ phase

The FCA is currently going through a “diagnostic” phase of its consultation into the platform market before publishing its review next summer.

It is collecting the data from companies and then following that up with remedies to fix any issues.

Finer pointed out pricing is not the only focus for the regulator in assessing competition among platforms.

He said a very important part of the study is how advisers choose platforms.

Finer said: “There are dimensions other than price. We are asking platforms what elements distinguish them from competitors and where they add value. Also, what elements of the platforms are important to consumers. We acknowledge price is only one part of the story, not the only one.”

For example, Finer said a review into the value of price comparison sites is also “an avenue” the FCA is exploring to understand how much people are paying “in totality”.

He reiterated the regulator’s focus on how platforms engage with fund managers to apply discounts, acknowledging the lack of clarity on various deals.

The FCA found that the amount of discount that platforms can extract from fund managers did not seem to be reflected from the pool of assets that can be invested through that platform.

Finer said: “We wouldn’t say it is unfair [for a platform to apply different discounts from another]. There are issues around charging below cost, but not in negotiating better pricing and passing benefits to clients…It is far from clear whether a fund on this platform [applies the discount] and how much one is paying from one platforms to another.”

Finer said the FCA is not ready yet to give details on how vertically integrated firms have responded to questions on how they are managing potential conflict of interests.