The review will look at non-advised products and execution only providers with a view to issuing a report in the middle of next year. It said that the review was in response to recent growth in the market.
The regulator will also take a look at practices surrounding buy lists. These have been controversial because asset managers have historically paid to be on the buy lists of some brokerage groups. The FCA will also examine other ‘guided architecture’ models to ensure that they are generating the right results for clients.
The minutes from the FCA’s June board meeting showed existing concerns from the regulator about continuing commission for execution-only models.
The execution only model has been expanding rapidly as the move to a fee-only model encourages advisers to focus on more profitable high net worth clients. Research from Deloitte shows there could be as many as 5.5m disenfranchised customers who will either choose not to use financial advice or lack access to it. These customers account for around 11% of the UK adult population and ‘represent a significant post-RDR gap’.
