Moves to make charges transparent
New rules introduced by the Financial Conduct Authority (FCA) mean that fees for investors using online "platform" services will be more transparent because they must be clearly shown upfront and agreed by the investor instead of being disguised in other costs.
Platform services act as middlemen and give people an online view of their investments in one place.
They work in a similar way to online banking, in that people can keep track of all the products they hold with a particular provider all grouped together. The selection of investments hosted by each platform varies.
This is because under the current system, providers of investment products generally make payments, which are commonly called "rebates" to some platforms in order to get their product included. This rebate is actually funded by the investor, through the annual management charge which they pay to the fund manager.
The FCA is concerned that this can make it hard for investors to compare prices and also creates the risk of bias in the investment market towards certain deals. Products offered by providers who are unwilling to pay a rebate to the platform in this way may not have their deals included.
The new rules will come into force in April next year, but platforms are being given an extra two years' grace until April 2016 to move existing customers to the new model of making charges explicit.
Christopher Woolard, the FCA's director of policy, risk and research, said: "Platforms provide a valuable service but investors are often unclear on what that service costs.
"These changes will allow both investors and advisers to compare the costs of investing through different platforms and make an informed decision on whether using a platform represents good value for money."
© 2013 Press Association