The UK's Financial Conduct Authority (FCA) has proposed new measures to help consumers investing in investment platforms to switch more easily to the right ones.
Image: FCA proposes new rules for investment market. Photo: Courtesy of Serge Bertasius Photography/FreeDigitalPhotos.net.
The FCA stated that the new proposals have been made in the final report of its Investment Platforms Market study.
The watchdog found that while competition is generally working well, some consumers and financial advisers can find it difficult to look for and switch to a platform that better meets their needs.
Consumers also find it difficult to switch due to the time, complexity and the costs involved in making a switch. It was partly due to the exit charges they incur and the difficulties in switching between the unit classes.
To address the issues, the FCA is consulting on rules to allow consumers to switch between platforms and remain in the same fund without having to sell their investments and proposing to ban or cap exit fees.
The proposed restrictions on exit fees will be applicable to platforms and also on firms which offer comparable service to retail clients. The UK watchdog is seeking views from a wider market about how such a restriction could work, before consulting on final rules.
It has welcomed industry in making such progress in improving switching process, as recently, Star introduced an initiative for improving efficiency in transferring process across the retail investment and pensions sectors.
The FCA is encouraging other firms not already involved in this initiative to consider in offering customers improves ways for switching between investments.
FCA strategy and competition executive director Christopher Woolard said: “While the market is working well for most of its consumers, the package we’ve announced today should make it less expensive and time-consuming for investors to shop around and move to the platform that best meets their needs. As part of that, we believe it is right that we restrict exit fees, so people can move their money freely.”
The regulator will review the progress made by the industry in improving the switching process later this year and again next year and it will consider taking further regulatory action if the efficiency of the switching process does not improve.