On 4th May 2022, the FCA published the findings from its investment platforms costs and charges review, which follows on from its investment platforms market study in 2018/19 but with a focus on non-advised customer journeys.
Generally, the FCA found it could identify and compare the main platform charges and the fund charges were signposted. But activity-based charges were sometimes harder to locate, and so it was unclear whether such activities would be charged for.
The FCA published good and poor practice examples, and a set of actions for platforms, along with a document summarising the key handbook provisions relating to costs and charges.
- single comprehensive lists of all fees and charges applicable;
- interactive tools, infographics, calculators and worked examples;
- simple and clear explanations of charges - for example via information buttons when hovering over terms or phrases used;
- platforms stating whether any exit fees apply or not.
Some platforms are using the UK Platform Group leaflet to help explain charges.
The FCA found one way of helping consumers was to clearly state that, if there are fees which are not listed, then that means they do not apply. An example from another sector is the widely used, industry agreed template for a ‘tariff of mortgage charges’ – this includes a statement: ‘When looking at the fees that other firms charge, you may notice that some don’t appear in our tariff (below). This means we don’t charge you for these fees.’
Mainly related to:
- a lack of a succinct comprehensive list of charges being clearly signposted;
- information being spread out across different webpages;
- too many links to different sections and pages;
- 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.
The FCA reminds platforms of it's previous MiFID II compliance reviews in February 2019 and February 2021, which highlighted some failings in relation to cost information shown in marketing documents not matching the information in regulatory documents, and some firms using assumptions which make costs look as low as possible.
The FCA reminds platforms that they 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.
This information needs to be provided in good time, before the provision of the investment business. Platforms will need to consider how they satisfy this timing requirement in an online environment, where transactions are typically concluded in a short timeframe. They 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. Platforms should review the detail of the FCA's Handbook provisions document and ensure they comply.
The FCA also reminds platforms of its proposed Consumer Duty.
The FCA clearly expects platforms to take action in response to its findings and ensure full compliance with the requirements, particularly given its previous publications and published concerns in this area.
"56% of consumers in the [Financial Lives] survey said they found it easy to find the total cost of investing on their platform and 14% said it was fairly or very difficult."