The UK’s financial regulator today launched an investigation into the rapidly expanding half a trillion pound retail funds supermarket sector.
The Financial Conduct Authority (FCA) is to question whether firms are offering value for money.
Retail fund supermarkets, such as Hargreaves Lansdown and Cofunds, have rocketed in popularity since the financial crisis. In 2008 assets under management totalled £108bn, which grew to £500bn in 2016.
The probe follows the publication of a final report on the asset management sector by the FCA in June, which highlighted a number of potential competition issues in the platforms sector.
“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,” said FCA executive director of strategy and competition Christopher Woolard,
“Platforms have the potential to generate significant benefits for consumers and we want to ensure consumers are receiving these benefits in practice.”
RBC Capital Markets analyst Peter Lenardos labelled the FCA plans an “unhelpful… regulatory overhang” for the likes of Hargreaves Lansdown, the UK’s largest non-advised platform according to the FCA figures.
Tom McPhail, head of policy at the Bristol-based fund supermarket, said the investigation had a “very broad scope”.
He added: “This study recognises the vital service platforms now provide to millions of people, helping them to save and invest for their future.”
Platforms can also bring pressure to bear on asset management costs, negotiating discounts for investors, promoting good funds and highlighting poor performers.
Meanwhile rival broker AJ Bell’s marketing director Billy Mackay said: “Platforms have helped revolutionise saving and investing in the UK by creating more efficient ways to hold and invest money. We welcome the regulator’s decision to take a detailed look at the platform sector, and in particular the value for money platforms deliver for savers.”