Are adviser platforms still 'double - dipping' into your cash!

The FCA's 18th September response has clearly identified good and poor practice in their price and value outcome especially for adviser platforms following the FCA Dear CEO letter regarding potential harm to consumers (double- dipping) and ultimately providers not meeting the consumer duty standards  which set out high and clear standards of protection for retail customers across financial services.

Some SIPP and adviser platform providers have also been identified as retaining interest on cash holdings to subsidise their loss-making adviser platform!

The FCA said: ‘There are also practices that are relevant to other costs such as general business costs. Here we have observed poor practice from some firms explaining retention of interest earned on cash-holding facilities by stating, without adequate elaboration, that this helps with the costs of running their platforms, which are loss-making.’

There are also many cases of good practice with one platform provider clearly demonstrating to the FCA linking the amount of interest retained to the costs of the firm managing customers’ cash. The firm used illustrative examples of different types of customers (e.g., with different holdings and different types of accounts) to demonstrate how much interest is retained and how much is paid to the customer. This example is also relevant to fees and charges.

At Defaqto we have seen advisers using our Defaqto Engage software to identify adviser platforms with higher interest rates and other PROD data as well as charges and advisers are telling us they have not noticed many changes following the consumer duty implementation and they have not changed many of their processes. 

So advisers have you got your clients on the right platform to give them fair value, if not you need to review your due diligence before the FCA closes the loss making ones!

In summary the regulator is till concerned over the role of providers in relation to consumer duty and expressed  that ‘It is important not to consider the price and value outcome in isolation. It should be considered alongside the other outcomes and cross-cutting obligations under the Consumer Duty (i.e., products and services, consumer understanding and consumer support).