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Regulation

FCA proposes improvements to U.K. investment platforms

The U.K. Financial Conduct Authority is seeking input from money managers on how to improve investment platforms.

The FCA, in a market study issued Monday, said it wants to boost competition in the £500 billion ($661 billion) market of investment services offered to savers directly or through intermediaries, after finding that savers are in some cases exposed to fees and risks they might not be aware of. The study is available on the FCA website.

The financial services watchdog wants to apply fund performance and risk disclosure obligations to investment platforms and standardize the way in which they describe strategies and asset allocation to participants, the study report said.

The FCA found investment platforms are not clearly communicating the degree of risk that is applied to portfolios. As a result, savers might be unaware of the risk they are taking. This makes comparison of investment platforms difficult and can expose investors to significantly different underlying assets and volatility, the FCA stated in the study. It also found that switching to other providers in some cases carries additional fees.

"This is a market that has seen significant growth in the past five years with more customers than ever deciding to use a platform to manage their money," said Christopher Woolard, executive director of strategy and competition at the FCA, in a statement accompanying the study. "We know that competition is working well for many but it is important that the problems we have identified are addressed so that consumers don't lose out."

Mr. Woolard added: "We have outlined a package of measures today to address the issues we have found, but we also want to see the industry step up, making it easier for consumers to transfer from one platform to another."

However, the FCA will not yet fine providers that do not disclose additional fees, as it said it expects requirements under the Markets in Financial Instruments Directive II to encourage innovation and disclosure of information.

Money managers have until Sept. 21 to comment on the market study. The FCA will publish its final report in the first quarter of 2019.