DIY Investor Magazine
| August 2017
20
AS INVESTORS FLOCK TO DIY PLATFORMS, CITY WATCHDOG
LAUNCHES PROBE INTO CHARGES AND TRANSPARENCY
FCA to ensure ‘wealthtech’ platforms deliver good value
to investors
Since the government’s Retail Distribution Review
forced advisers to charge upfront fees rather than to
take commissions from the products they advised on,
investors have rushed to DIY investing platforms in order
to take personal control of their finances:
Muckler
takes
a closer look to see what we can expect as the FCA
investigates whether they receive good values from the
platforms.
Those believing that their advice had been ‘free’ were
often horrified to see the true cost of advice, whilst
others were ditched as unprofitable by their advisers
because they had too little to invest; the result has been
a boon for online brokers and platforms as investors
have piled into them as well as the rise of automated
advice – ‘robo advice’ - platforms.
According to the FCA, DIY investing platforms held
some £592billion of investors’ money in 2016, compared
with £108billion in 2008, with a further £100billion held
with D2C platforms operated by banks, insurers and
wealth managers.
The chart below shows the dramatic growth that some
platforms have experienced and the FCA is anxious to
ensure that customers are getting value for money, that
the brokers’ bargaining power is being passed on and
that there is price transparency.
‘DO IT YOURSELF, DO IT WITH ME OR DO IT FOR ME – HAVE
BECOME INCREASINGLY PREVALENT SINCE RDR AND THEIR
IMPORTANCE CAN ONLY INCREASE’
MANY PROCLAIM ‘FIRE’ AS THEIR OBJECTIVE – FINANCIAL
INDEPENDENCE, RETIRE EARLY
FIG 1: FCA’S FIGURES SHOW THE SURGE IN DIY
INVESTING PLATFORMS
The watchdog is to probe whether DIY investing
platforms deliver value for money to the large and
increasing number of investors that use them to buy
funds, shares and other investment products; it will also
spotlight the increasing number of model portfolios
that are on offer to ‘Do it With me’ investors looking
for an off-the-shelf portfolio as well as the ‘own brand’
funds that companies such as AJ Bell You invest and
Hargreaves Lansdown have brought to market.
The probe was announced last month alongside the
FCA’s review of the fund management industry, which
called for firms to publish a ‘single, all-in-fee’; this would
mean that costs such as trading commissions, which
were previously ‘hidden’ in the fund, therefore affecting
its performance, would be made explicit, allowing
investors to see exactly what they are paying.
FCA executive director Christopher Woolard, said:
‘With the increasing use of platforms, and the issues
raised by our previous work, we want to assess whether
competition between platforms is working in the interest
of consumers. ‘Platforms have the potential to generate
significant benefits for consumers and we want to
ensure consumers are receiving these benefits in
practice.’ ‘The Financial Conduct Authority will explore
whether platforms help investors make good investment
