Forcing asset managers to offer the same price to all platforms could drive up costs to consumers, Fundscape CEO Bella Caridade-Ferreira has warned.
Although Caridade-Ferreira welcomed the regulator looking into the platforms market, she warned an unintended consequence of the study may be increased prices for end-investors.
The FCA today revealed the scope of its Investment Platforms Market Study, noting the platform market was becoming "increasingly vertically integrated" with commercial relationships existing between platforms, asset managers, discretionary investment managers and financial advisers.
These relationships, it suggested, had the potential to distort competition by encouraging platforms to compete in the interests of those with which they had commercial relationships, rather than in the interests of the consumer.
Caridade-Ferreira said the regulator seemed to be looking closely at vertically-integrated solutions and commercial arrangements and partners - indeed, anywhere where a strong commercial relationship may distort the market and not be in the interest of the consumer.
She warned, however, that if the FCA was planning to try to force asset managers to offer all platforms the same prices, it risked them increasing their charges, which would not be in the interests of the consumer.
"What you could end up with is very much a clean share class situation, where fund managers go 'OK, our minimum fee for platforms is going to be 75 basis points (bps) and everyone is going to pay that'," she explained.
"If you try and force people into a corner and say everyone should get the same price, they are going to protect their interests and push up prices. It could cost people more than it did before."
'Squeeze best deal'
On a similar point, AJ Bell marketing director Billy MacKay said a key focus for the FCA in the study would be ensuring platforms are positioned to "squeeze the best possible deal" out of asset managers on behalf of their users.
"As part of this, the regulator should re-examine the ban on the payment of cash rebates from fund managers to platforms," said MacKay.
"Provided cash rebates are paid 100% for the benefit of customers, unwinding this ban would enable platforms to use their scale to negotiate discounts for their customers.
"This would help reinstate a more competitive dynamic between platforms and the fund groups and would clearly result in better outcomes for consumers by helping bring fund costs down."
Footing the bill
The FCA also said its study would seek to understand whether other parts of the value chain affect the willingness and ability of platforms to compete in the interest of consumers - including financial advisers who use intermediated platforms to access different retail investment providers on behalf of their clients.
As such, gbi2 managing director Graham Bentley questioned why, since it had become the norm for advisers to use a platform "to all intents and purposes" as a back office, the consumer had to be the one to foot the bill.
"It is fair for the FCA to look at platforms," he said. "The vast majority of customers accessing funds today have to go through some sort of a portfolio process and, if you reckon that costs 35bps or maybe more, you have to check the process is appropriately competitive.
"Competition ought to lead to falling prices but the question is - does it? I would argue that, with most adviser-led platforms, the relationship is between the platform and the adviser and - to all intents and purposes - it is an adviser's back office. So you have to ask, why is the customer paying for it?
"If a customer wants access to investments and has to go through a platform, then that is taking a fair chunk of their returns away."
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