On July 17, 2017, the Financial Conduct Authority (FCA) announced that it will explore whether investing platforms help investors make good investment decisions, and whether their investment products offer investors value for their money. The FCA is a financial regulatory body in the United Kingdom that regulates financial firms providing services to consumers. The FCA defines a platform service as a service which offers access to third-party investment products.

The new investigation was announced last month alongside the FCA’s review of the fund management industry, which called for firms to start publishing a “single, all-in-fee,” including transaction costs so investors can see exactly what they are paying.

The FCA’s probe will focus on five broad areas: (1) Barriers to entry and expansion: Do large platforms benefit from economies of scale that smaller firms and new entrants struggle to match?; (2) Commercial relationships: Are platforms willing to negotiate a competitive price on investment charges, do commercial relationships drive investment choices, and what are the implications for investors?; (3) Business models and platform profitability: Do the drivers of profitability affect firm incentives and the factors over which they compete, and if so how does it affect investors?; (4) The impact of financial adviser platforms: Do these compete in the interests of the end investor, and are any benefits passed through to investors?; and (5) Customer preferences and behavior: Do platforms enable consumers and advisers to assess and choose services and products that offer value for money, and do new challengers struggle to compete as customers face barriers to switching?

The Investment Platforms Market Study Terms of Reference is available at https://www.fca.org.uk/publication/market-studies/ms17-1-1.pdf.  The FCA plans to publish an interim report on its findings by summer 2018.