Blame game over transparency is not constructive
4 June 2017
FCA focus on transparency is good for platforms and DFMs alike, says Lawrence Cook, Director of Marketing and Business Development at Thesis Asset Management
April’s announcement by the Financial Conduct Authority (FCA) that it plans to study the UK platform market to investigate competition sparked lively debate within the investment community.
However, this discussion revealed that some consider the FCA’s focus to be misdirected, and that it should instead look at other providers such as DFMs. They argue that platform charges are easily accessible, whereas the same cannot be said of discretionary fund managers (DFMs) and wealth managers.
The findings and reaction to the FCA’s asset management review in November identified a number of potential competition issues with investment platforms – both advised and direct to consumer.
We must remember that the FCA is not attacking anyone. It is simply asking firms that deliver a service to clients whether they are actually delivering value for money. That seems like a reasonable question to ask of any industry.
The FCA isn’t suggesting a price cap, it is simply asking ‘Are you doing what you say you will and are your charges clear to the consumer?’. The industry needs to wait and see what the regulator proposes before reaching conclusions
Rather than blaming different types of providers, it might be more constructive to highlight how platforms and DFMs have worked to together to enhance service for clients.
For example Thesis provides a discretionary service through seven wrap platforms. With a number of them we can offer portfolios typically found at the premium end of the market but at a wholesale price. We can do this because platforms have really developed their technology, meaning we can now deliver the highest quality service to a much wider audience – including, for example, models that hold UK equities directly instead of funds. That increases access to services to those with modest pockets in a scalable and consistent format and is easy for advisers to use.
Platforms, like all other aspects of investment such as research, monitoring and client reporting, obviously cost money and we agree with those that urge more transparency within the industry, including within discretionary services. Different firms deliver on different parts of the value chain, and all services can vary from the budget to the premium. Clients and advisers can pick ones to suit their preferences and their budget.
DFMs have already made great strides, and spent money, on improving transparency. Information is now available from a variety of reliable sources; Asset Risk Consultants, Defaqto, Financial Express and a raft of risk profiling tools, not to mention integration with back office providers like Intelliflo and IRESS. Yes there is more to do, there always will be, but credit where it is due to the majority of DFMs who are serious about working with advisers and platforms and improving the service clients receive.
Improved client choice and more transparent charges will attract more clients – something that benefits all participants in investment management.
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