Financial watchdogs are to look at if supermarket shopping for pensions and investments is good for the wealth of consumers.
The Financial Conduct Authority is to investigate the returns and costs for savers and investors across a range of online platforms.
The FCA wants to see how platforms from banks, insurance companies and specialist firms compete and if they pass the benefits of pooling investments on to consumers.
The main concern is that six of the biggest 10 platforms are linked to an asset manager and that such ties can distort competition.
Online platforms mainly offer consumers easy access to a wide range of savings and investments without offering advice or recommendations.
The industry has assets of £692 billion under administration – a huge jump from £108 billion in 2008.
Armchair investing
Share supermarkets are popular with millions of DIY online investors who manage their money from a smartphone, tablet or computer,
The suitability of investments and charges are regularly criticised.
Some platforms are accused of giving investment advice disguised as tips and market news.
Most have a baffling array of charges for the same investments.
“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,” said Christopher Woolard, FCA executive director for strategy and competition.
He explained the aim of online platforms was to pool investor cash to achieve better investment returns.
Pricing concerns
The FCA investigation will look at how platforms work until September, when the results will be analysed for a report early in summer 2018 which will make recommendations to reform the market.
Investment research consultants Platforum has fears about how platforms negotiate prices with asset managers.
“We are concerned with the continued focus on platforms negotiating prices with asset managers. Some platforms do have buying power but many don’t influence flows, so will struggle to perform this function,” said a spokesman.
“Platform pricing is complex – this is down both to the structure of platform fees and varying costs of underlying funds. Advisers and investors shouldn’t consider platform charges alone but the overall charge is devilishly difficult to calculate.”
