The UK’s investment platforms such as Hargreaves Lansdown, The Share Centre and AJ Bell between them now account for around 80% of all investments made by Brits. They combine stock broking services with fund supermarkets and even bonds as well as providing wrappers such as ISAs and SIPPs. Users find these platforms convenient to use due to the fact they offer dashboards that present all investments in one place, making them easy to track. Additional value such as access to market data and research is also offered by many of them.
However, a recent year-long investigation conducted by the FCA, the government body that regulates the financial industry, has come to the conclusion that the platforms most Brits use when investing online do not make it easy enough to transfer an account from one platform to another. Investment platforms have become more popular in recent years with the value of assets under their management nearly doubling since 2013 to over £500 billion.
New fintech challengers, often app-based, are now slashing the costs of investing online. Robo-advisors that put investors into a portfolio of shares and funds based on their personal financial situation and appetite for risk are a further threat to the established platforms. However, the FCA review came to the conclusion that moving investments from one platform to another for a better deal may not be as straightforward as it should. The regulator stated:
“barriers to switching are significant and could limit the pressure on platforms to provide continued value for money”.
The investigation’s key finding was that around 7% of those investing in ISAs and SIPPs through platforms have tried and failed to switch provider. Another deficiency uncovered was that platforms are not doing enough to make clients holding large cash balances on their accounts aware that they are missing out on interest or investment returns by doing so. A further problem is clients who have used an advisor in the past but no longer do so. These investors often have their portfolios held on advisor-specific platforms to which they have limited access to if they stop working with their advisor.
Final conclusions and proposed changes will be published by the FCA early next year. Markets clearly believe that the investigation will increase competition in the sector with the share price of Hargreaves Lansdown, the FTSE 100 company which is the investment platform with the largest share of the UK market, dropping by 4% in morning trading.
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