Direct-to-consumer (D2C) platforms favour affiliated funds and those that pay them greater commission rates when compiling 'best buy' lists, FCA research has found.
In its ‘occasional paper', Best buys and own brands: investment platforms' recommendations of funds, the regulator sought to identify "potential conflicts of interest when creating these lists". The report said: "Controlling for past performance, Morningstar analyst rankings, costs, and other variables, affiliated funds are significantly more likely to be added to the recommendation list than non-affiliated funds. Graham Bentley questions independence of certain 'best buy' lists "Average model-implied addition probabilities, across the three platforms and the whole data sample, for...
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