This article looks at investment platforms and reflects on areas where they should pay particular attention in order to help consumers make more informed decisions about the choice of platform based on their circumstances and requirements. We also reflect on the FCA’s market study in this sector.
What are investment platforms?
Investment platforms arrange, safeguard and administer investments on behalf of consumers and offer them access to retail investment products from different providers. Consumers may also access information and services to make informed decisions about buying and selling shares and funds.
There are two main types of platforms for investments, namely, direct-to-consumer platforms without requiring help from a financial advisor and advisor platforms, which are chosen by advisers but paid for by consumers.
The FCA expects such platforms to offer services which meet consumer expectations.
Platforms fees and charges
Consumers should be able to easily access, assess and compare information on non-price features and understand how much it will cost them to invest through different platforms. In its market study, the FCA found that platform charges could be more readily available and easier to understand to help consumers compare platform and investment costs more easily. Consumers can find it difficult to shop around and compare platforms based on price. Fee structures should therefore not be complex and explain all the different charges in simple and understandable language so that consumers can calculate the total costs of investing and compare different options more easily.
How investment platforms can help consumers with their charges
Explain charges with examples of customer scenarios
Provide comparison charts, tables and calculators so that consumers can compare scenarios e.g. potential returns.
Provide tools that allow consumers to personal costs and charges based on their specific requirements and circumstances
Provide videos and visuals to help consumers understand fees and charges
Present information on its fees and charges in a clear and transparent manner. For example, how many clicks does it take the consumer after visiting your website or app to find the relevant information about your fees and charges? This number should be as low as possible.
Switching platform
The FCA found concerns with consumers' ability to switch from one platform to another, due to time, complexity and the cost of switching. This creates poor consumer outcomes as platforms may not be offering consumers good value for money.
Platforms should improve their switching process, including clear customer communication when switching away from their platform.
Reasons for switching platforms
Actual barriers to switching experienced
Exit fees
Exit fees can act as a barrier to delivering good customer outcomes and helping consumers to meet their needs and financial objectives. Exit fees further complicate the process for consumers when comparing and choosing between platforms, often because such fees are disguised or not made clear from the outset.
How we can help
In helping firms implement the Consumer Duty requirements, we are helping firms in a number of ways from complete project management and providing specialist project resources to adding consulting and advisory expertise as an external specialist partner.
Buckingham Capital Consulting is an international consulting firm, specialising in payment services, electronic money, banking, and investment services. We are able to advise you on the best course of action and strategy based on your business plan and financial product or service. We can you with licensing, compliance, operational setup and related services, including, obtaining banking facilities. For more information, visit our website at www.buckinghamcapitalconsulting.com or call us on 0207 866 2512.