Home / Articles / Investment fund supermarkets face FCA probe

Investment fund supermarkets face FCA probe

The City regulator is to examine whether savers get value for money from so-called investment “platforms” – otherwise known as fund supermarkets.Between 2008 and 2016 investors quintupled the amount of money they put into such platforms, the Financial Conduct Authority (FCA) said.Companies such as Hargreaves Lansdown, Nutmeg and Interactive Investor now manage £592bn of savers’ money.The FCA will examine whether such firms help investors make good decisions.It follows a previous inquiry into those who manage the funds that are sold on investment platforms, which found high levels of profitability.The study found typical profit margins in the industry of 36% – and concluded that investors should be quoted a single fee, rather than a complex mix of charges.Savers putting money into investment platforms pay a fee to each fund manager, as well as to the platform itself.FCA cracks down on investment industry chargesVanguard sparks price war amongst investors”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 Christopher Woolard, the FCA’s executive director of strategy and competition.”Platforms have the potential to generate significant benefits for consumers, and we want to ensure consumers are receiving these benefits in practice.”The FCA will look at:the impact of platforms on overall charges
whether platforms use their bargaining power to negotiate good deals for consumers
whether they compete effectively with each other
whether their commercial interests are in conflict with the interests of consumers
Price competitionAJ Bell, which operates an investment platform, said it welcomed the inquiry.”Platforms have helped revolutionise saving and investing in the UK by creating more efficient ways to hold and invest money,” said Billy Mackay, marketing director at AJ Bell. Hargreaves Lansdown said the study recognised the vital service platforms now provide to millions of people. “This paper is not simply about the price charged by retail investment service providers, it is about the value they deliver to investors,” said Tom McPhail, head of policy at Hargreaves Lansdown.Hargreaves Lansdown saw its share price hit in May when US firm Vanguard announced a cut-price service for UK investors.Vanguard plans to charge investors a maximum fee of 0.15% on its tracker funds, capped at £375 a year.Hargreaves Lansdown charges 0.45% to hold investments in its Vantage service. The FCA will also look at investment platforms’ “model portfolios” where they suggest recommended funds to their clients.
Source: BBC News

About Business Ideas UK

My name is Joel Bissitt. I have been an entrepreneur for 24 years and have run many small businesses across various sectors. For the last 10 years I have worked mainly within online media, franchising and small business start-ups.

Check Also

Another 40 Poundworld stores to close

Forty more Poundworld stores are to close later this month, leading to the loss …

Free Franchise Guide
close slider

Free Franchise Guide

Interested in buying a franchise? The our FREE Franchise Guide is a must! The guide contains lots of information to help you decide if franchising is right for you.

Yes, I'd like to join the Franchise UK mailing list.