Earlier this week the FCA published the Terms of Reference (ToR) for its Investment Platforms Market Study. The ToR set out the specific areas the FCA is interested in exploring, including:

  • the impact platforms have on overall charges for investment products;
  • whether investors and advisers can assess the value for money of investment propositions, including investment products and platform services, from the information platforms make available;
  • barriers to entry and expansion faced by platforms, including access to technology providers and the importance of scale;
  • the impact of vertically integrated platforms, and specifically commercial relationships between platforms, asset managers, discretionary investment managers and financial advisers; and
  • the different platform business models and profitability.

The Market Study follows the Asset Management Market Final Report issued in June 2017, which highlighted a number of potential competition concerns with the increasing significance of platforms in the distribution chain.

The FCA is not consulting on the ToR but is interested in feedback on the specific topics it has identified. It has requested feedback by 8 September 2017. The FCA aims to publish an interim report by summer 2018, which will set out preliminary conclusions and any potential remedies to address concerns.

Comment

This Market Study has been widely trailed by the FCA. Online platforms are a key feature of financial services markets. They are increasingly integral to companies’ business strategies and distribution models. They are also increasingly of interest to regulators and competition authorities, whose interest extends well beyond financial services markets.

The UK’s principal competition authority, the CMA and its predecessor bodies, have considered the impact of platforms in a wide range of markets, including insurance services. Whilst there is a general acceptance that platforms help to improve competition, there are also concerns that potential concentrations of online distribution channels and the emergence of vertically integrated business models and commercial relationships through the supply chain may reduce consumer choice and risk distorting competition.