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A large part of what platforms do is to make investment opportunities – which can include listed investment companies, as well as other pooled investment vehicles such as unit trusts and exchange-traded funds – available to retail investors.
Although the specific application of the relevant rules can be complex and may vary in terms of detail depending on the precise business of a platform and the services that it offers, platforms will generally be treated for regulatory purposes as being distributors of investment products to retail investors.
This means that platforms are subject to the Financial Conduct Authority rules applicable to distributors of financial instruments and to the FCA’s consumer duty, which, at a high level, requires regulated firms to act to deliver good outcomes for retail customers.
On September 19, the Treasury and the FCA published a forbearance statement, temporarily exempting investment companies from the current cost disclosure regime.
Platforms are often the single, easiest way for a customer to understand what charges they are paying for and how these are likely to impact them
The cost disclosure regime is a set of rules that help investors understand the costs and value of investments.
Currently, the UK is reforming its cost disclosure framework to better suit its market needs.
The government plans to replace the EU-inherited Priips regulation with a new framework for consumer composite investments (CCIs).
This new regime aims to provide more tailored and flexible rules, addressing industry concerns with current disclosure requirements, including those related to costs.
The new retail disclosure regime is expected to be in place in the first half of 2025, subject to parliamentary approval and the FCA consultation process.
Additionally, the FCA has acknowledged issues with the current cost disclosure requirements for investment trusts, which have been criticised for potentially misleading cost representations.
In response, the FCA has set out temporary measures to give investment companies greater ability to explain their costs and charges, helping consumers make better-informed investment decisions.
Rory Gravatt, life and pensions director at Altus Consulting, says: “As a first port of call for many customers, platforms are often the single, easiest way for a customer to understand what charges they are paying for and how these are likely to impact them – provided they understand how the products that they are invested in work.
“The problem is that, as has been widely reported, the old scheme for disclosure inadvertently penalised closed-ended funds such as investments trusts by effectively suggesting that double charging was in effect.
“The new disclosure recommendations for these asset types, while implemented by some platforms, have not been implemented by all, thereby misleading customers as to the true costs of their investment – this makes life much more complicated for advisers and customers alike.”
