In our Investment Platforms Market Study[1] we said we would keep the role of platforms in helping consumers understand their investment costs under review. We have now reviewed current practices and our findings are below.
Our work supports the Consumer Investments Strategy[2] and our focus, as part of our new three-year strategy[3], on ensuring fair value for consumers.
We want to help consumers navigate the investments market in an online environment – enabling them to understand and compare the costs of using different platforms.
Consumers should be able to easily identify and understand their investment charges so they can choose the investment channel and products that are right for them.
What we found
We focused on the experience of non-advised consumers. We looked at how easy it is to access charging information and whether the information available helps them understand what they pay.
We could generally identify and compare the main platform charges and the fund charges were signposted. But activity-based charges were sometimes harder to locate, such as telephone trades costs, foreign exchange, and interest on cash. Where we could not find information about certain charges, we were left not knowing whether they would be charged for.
Our Financial Lives Survey[4] identified that:
- 56% of consumers in the survey said they found it easy to find the total cost of investing on their platform and 14% said it was fairly or very difficult.
- Around half (51%) said they found it easy to compare the total costs of investing between platforms, and around a quarter (28%) said they found it fairly or very difficult.
Good practice
This included:
- single comprehensive lists of all fees and charges applicable
- interactive tools, infographics, calculators and worked examples
- simple and clear explanations of charges - for example via information buttons when hovering over terms or phrases used
- platforms stating whether any exit fees apply or not
Some platforms are using the UK Platform Group leaflet to help explain charges.
One way of helping consumers is to clearly state that, if there are fees which are not listed, then that means they do not apply. An example from another sector is the widely used, industry agreed template for a ‘tariff of mortgage charges’ – this includes a statement: ‘When looking at the fees that other firms charge, you may notice that some don’t appear in our tariff (below). This means we don’t charge you for these fees.’
Poor practice
This was mainly related to:
- a lack of a succinct comprehensive list of charges being clearly signposted
- information being spread out across different webpages
- too many links to different sections and pages
- omission of a clear statement of the interest applying to any cash held or the information being ‘hidden away’ in legalistically worded terms and conditions
We felt that this could lead to confusion and a lack of confidence for consumers making comparisons on price information.
Platforms should also be aware of our previous compliance reviews - February 2019[5] and February 2021[6]. These highlighted some failings in relation to cost information shown in marketing documents not matching the information in regulatory documents, and some firms using assumptions which make costs look as low as possible.
What do platforms need to do?
Platforms need to provide both existing and potential clients with:
- all costs and charges - clearly explained
- total prices/aggregated costs - expressed both as a cash amount and as a percentage - with a breakdown available
- illustrations showing effect of costs on returns
This information needs to be provided in good time, before the provision of the investment business. Platforms will need to consider how they satisfy this timing requirement in an online environment, where transactions are typically concluded in a short timeframe. They may need to provide all the information in a manner which is immediately available, such as openly published on websites, to ensure they meet the information needs of potential clients.
Platforms should also be aware of our proposed Consumer Duty[7]. Whilst our final rules have not yet been decided, there are proposals which firms should be aware of. For example, we have proposed that firms should test communications, where appropriate, to make sure they support consumer understanding in practice.
Platforms should review the detail of our Handbook provisions[8].
Next steps
Platforms should review the information on this page and ensure their compliance with our Handbook rules[8]. They should familiarise themselves with our proposed Consumer Duty[7] and be aware of our Consumer Investments Strategy[2].
We will be carrying-out a review of industry progress in improving the switching process.