The Financial Conduct Authority (FCA) announced a market study into investment platforms in its 2017/2018 Business Plan and, on 17 July 2017, it published the terms of reference of this market study, delineating its scope and the areas to be covered. It will focus on whether competition between investment platforms works in the interests of consumers. The FCA considers that investment platforms are an increasingly significant part of the retail distribution landscape. As the market becomes progressively more vertically integrated, the question arises, however, whether commercial relationships between platforms, asset managers, discretionary investment managers and financial advisers have the potential to distort competition by encouraging platforms to compete in the interests of those with which they have commercial relationships rather than in the interests of the consumer.

The FCA’s terms of reference define a platform service as a service that offers access to third party investment products. In recognition of the wider distribution landscape, however, the FCA has adopted a broad definition of ‘platforms’. This includes: (i) platforms and other firms that offer access to retail investment products through an online portal, whether direct-to-consumer or intermediated, (ii) other intermediaries who provide retail investors with services similar to those offered by a platform but without necessarily providing access to third party investment products, (iii) product and wrapper providers who use platforms to distribute their products, (iv) technology providers to whom platforms outsource services, and (v) fund ratings and data providers whose information is used and distributed by platforms. The market study will explore six key topics: (i) how platforms compete to win new and retain existing business, (ii) barriers to entry and expansion, (iii) commercial relationships, (iv) business models and platform profitability, (v) the impact of advisers, and (vi) customer preferences and behaviour.

In terms of next steps, the FCA is inviting feedback on the scope of the market study by 8 September 2017. An interim report presenting preliminary conclusions (and, if necessary, potential remedies) is expected by summer 2018.