Investment platforms & duty of care

Informed Choice chartered financial planner Martin Bamford was quoted in Investment Adviser magazine recently, in an article looking at the duty of care exercised by investment platforms.

The Financial Services Authority (FSA) explains within the article that investment platforms have no duty of care for investors when it comes to the availability of funds.

What this means in practice is that an investment platform could offer investment funds without considering their suitability, risks or long-term viability. By being selective about the specific funds on offer, the platform could be seen as providing advice.

The financial adviser, however, does have a duty of care – particularly if they are an independent financial adviser acting on behalf of their clients.

We believe that investment platforms should offer all available funds, leaving the financial adviser to exercise their duty of care in ensuring suitable recommendations.

However, execution-only investment platforms where there is no advice provided do need to exercise caution when it comes to making funds availability.

We would argue that these direct to consumer investment platforms need to exercise a higher duty of care than those investment platforms which can only be accessed via a financial adviser.

Photo credit: Flickr/joeflintham