The detail follows the announcement of the study earlier this year. It is designed to explore whether platforms enable retail investors to access products which provide value for money.
In the terms of reference (38 page / 848KB PDF) now published, the FCA said it would look at how platforms compete and assess whether relationships between investment platforms and other platforms, advisers, asset managers, and fund ratings providers, work in the interests of investors.
The study will cover a range of organisations including platforms offering products to retail investors through an online portal, intermediaries such as financial advisers, product and wrapper providers, technology providers and the fund rating and data providers used by platforms.
Wealth management expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com, said the study was primarily focused on platforms and equivalent online distributors, although it would consider what the FCA refer to as the "wider distribution market" relating to platforms.
“The FCA seems to be focusing on platforms because they are so integral to the retail investment infrastructure," Ashby said. "Just because platforms are at the centre of so much retail investment activity doesn’t mean that they are in a position to control pricing and distribution in the way that the FCA seems to be suggesting, and platform providers will be hoping that the market study serves to confirm this.”
“It is unlikely that the FCA will expect to go through the process without some resulting action at the end of it and so platform providers will need to be braced for some challenges after the feedback closes in the autumn,” Ashby said.
The FCA said it wanted to establish how platforms compete with each other. To do this it will look at issues such as barriers to entry and expansion, commercial relationships, business models and platform profitability, whether advisers compete in the interests of the end investor and if they have a positive impact on the cost and quality of the platform.
It will examine the economies of scale which may be achieved for larger platforms in terms of IT and infrastructure costs and whether platforms have to overcome other barriers to entry or expansion, including any impact of outsourcing to third party technology firms.
The FCA said many platforms were in the process of switching their third party technology provider and at the end of 2016 approximately £206 billion in assets were due to be moved, representing 54% of market share and 2.4 million clients. Almost three-quarters of market share would be held on a third-party technology provider as a result of the shift, according to the FCA.
The FCA is taking comments on the study until 8 September 2017 and is proposing to issue an interim report by summer 2018.