FCA investment platform costs and charges review findings published

On 4 May 2022, the FCA published the findings from its investment platforms cost and charges review. The review formed part of its Investment Platforms Market Study, aiming to help consumers navigate the investment market in an online environment, enabling them to understand and compare investment costs of using different investor platforms. See the findings here.

The review focused on the experience of non-advised consumers, seeking to identify how easy it is to access charging information on investment platforms and how valuable the existing information was.

What did the FCA find?

The FCA was able to identify and compare the main platform charges and the fund charges were generally well signposted. However, activity-based charges such as foreign exchange, telephone trade costs, and interest on cast were sometimes harder to locate.

Examples of good practices

• single comprehensive lists of all applicable fees and charges;

• interactive tools, infographics, calculators and worked examples, simple and clear explanations of charges; and

• platforms stating whether any exit fees apply or not.

It also found some platforms using the UK Platform Group leaflet to help explain charges.

Examples of bad practices

• a lack of a succinct comprehensive list of charges clearly signposted; 
• information being spread out across different webpages;
• too many links to different sections and pages; and
• omission of a clear statement of the interest applying to any cash held or the information being 'hidden away' in legalistically worded terms and conditions.

What does this mean for platforms?

Platforms need to provide both existing and potential clients with:

• all costs and charges clearly explained;
• total prices/aggregated costs expressed both as a cash amount and as a percentage with a breakdown available;
• illustrations showing effect of costs on returns.

The FCA stated that the information needs to be provided in good time, before the provision of the investment business. It warned platforms to be conscious of how they may satisfy the tricky timing requirement in an online environment, where transactions are typically concluded in a short timeframe. It was suggested that the platforms may need to provide all the information in a manner which is immediately available, such as openly published on websites, to ensure they meet the information needs of potential clients.

What's next?

The FCA advised platforms to be familiar with its proposed Consumer Duty and be aware of its Consumer Investments Strategy. Finally, the FCA advised platforms to ensure compliance with its Handbook rules as it indicated that it will be carrying-out a review of industry progress in improving the switching process.