Investment platforms market study - AJ Bell reaction

Andy Bell
14 March 2019

The FCA has today published the final report from its Investment Platforms Market Study

Andy Bell, chief executive at investment platform AJ Bell, comments:

“Investment platforms play a vital function in helping people manage their long term savings and the regulator is absolutely right to question whether consumers are receiving the best possible service and value for money.  Identifying areas where customer outcomes can be improved is vital for the development and growth of an increasingly important market and today’s report is a significant step in the right direction.”

Platform switches & exit fees

“Switching between platforms is definitely an area we’d like to see improved and the FCA is right to extend this beyond the boundaries of platforms to comparable services.  Any measures to improve transfers between providers should be industry wide and include non-platform products to create a level playing field.

“Platform exit fees are generally intended to cover the reasonable costs involved in switching customers to a different platform.  Exit fees in other parts of the market look to recoup acquisition expenses and are far more punitive than platform exit fees and hence more of a barrier to switching products.

“A restriction in platform exit fees would not have a material impact on our business and as a net receiver of assets, we would expect to benefit from greater transferability of assets in the market.

“It is also good to see the FCA address the issue of multiple share classes of the same fund which arguably presents a bigger barrier to platform switches.

“Ultimately, enabling easier transfers of assets between platforms and other competing products will ensure customers are able to move more easily to better value services and will ensure healthy competition in the sector.”  

Value for money & shopping around

“We were hoping the regulator would include measures on platform fee disclosure but it appears to have sidestepped that issue.  We would like a requirement for platforms to show annual charges in pounds and pence and how they compare to the wider market.  This would provide a simple starting point for anyone looking to compare platforms and assess value for money.  Customers engage with an annual charge shown in pounds and pence far more easily than percentage charges that they then have to calculate themselves.

“We believe this disclosure should require platforms to publish their revenue margin, expressed as £ of revenue per £100,000 of investment, prominently on their website.  This measure cuts through the complexity of different platform charging structures and shows people the level of charges each platform levies per £ invested.  

“Based on the 2016 numbers from the interim report that would show that platform fees per £100,000 ranged from £220 per year to £540 and people could see where their platform sits on the scale.  This is a huge difference for what is in essence a commoditised service.”  

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