Platforms have failed to reduce the cost of investing post-Retail Distribution Review (RDR), the lang cat principal and founder Mark Polson has said, adding the regulator was onto them for the right reasons.
The Financial Conduct Authority (FCA) yesterday published plans to launch a platform market review, saying it wanted to determine whether platforms enabled retail investors to access investment products that offer ‘value for money'.
In a separate Sector Views paper, the regulator indicated platforms had failed to give retail investors enough opportunity to take advantage of discounts on fund charges that their scale allowed them to receive.
Polson (pictured) said this was proof the regulator "gets it". He said: "Platforms have done lots and lots of good things but have failed to reduce the cost of investing. Post-RDR it's more expensive than it was pre-RDR when bundle deals were about, which doesn't appear to be a normal market result.
"This has been a massive failing for platforms - they're meant to aggregate deals and, at a custodian level, if you're aggregating you should be able to get value for money."
The regulator also said it would look at complex charging structures, how platforms compete to win and retain customers as well as whether platforms have the ability to put competitive pressure on asset management charges.
Distracted by developing 'cool tools'
Polson argued platforms had been distracted by upgrading technologies and developing "cool tools" - so it had been a case of priorities rather than a conscious decision to neglect the end client.
The lang cat works with a lot of platforms and is generally considered a big defender of platforms.
Despite this, Polson said platforms had opened themselves up for what they're about to receive.
"When we're working in quasi-institutional way, working with large sums of money and not tiny trades, why aren't platforms realising economies of scale? Platforms weren't about cool tools, it was about accessing the deals investors couldn't by themselves," he said.
He added: "We get caught up in a few bps but an institutional version of a fund is available 25-50bps cheaper - that's a genuine difference, so why has something not been created, which allows customers to access something similar?
"I'm sure there are platform providers around the country thinking ‘oh god it's been on our to do list for ages'."
Warning to advisers
The regulator also re-issued a warning to advisers on Tuesday about the need to consider the cost of the whole investment chain, including platforms and advice, when determining value for money for clients.
Director of strategy and competition Christopher Woolard said: "What we have to look at there is, in terms of cost, what value is the consumer receiving - is that being thought about in the round, rather than being thought of in discrete chunks? Because we need to add up that total cost."
Rory Percival highlighted similar issues while he was at the regulator, and previously warned advisers on "self-defeating transactions" where clients would not see value for money in the investment chain.
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