Execution-only review

According to Investment Week, The Financial Conduct Authority (FCA),which has previously raised concerns about some practices in the execution-only market, particularly around the retention of legacy commission, has launched a review of the execution-only market, examining all aspects of the industry including looking at buy lists for the first time.

The FCA is understood to be looking at a broad range of execution-only businesses following the rapid growth of the non-advised sector.

Its work is currently in the early stages but may turn into a full thematic review depending on the initial findings. It is expected to look into fund buy lists, a large part of many execution-only business models, as well as guided architecture processes.

Buy lists are classed as ‘guidance’ rather than ‘advice’ under current regulations. However, the FCA is understood to be keen to examine any commercial bias which may influence funds selected for consumer-focused buy lists.

The FCA has already raised concerns about commission continuing for execution-only models, with minutes from its June board meeting highlighting its worries over the distinction between advised and non-advised sales.An increasingly broad range of firms now offer execution-only services for direct investors, often with some form of guided architecture, in an effort to bridge the industry’s burgeoning ‘advice gap’.

While execution-only businesses state clearly they are not offering advice, and email communications to investors are strictly regulated, the growth of the sector has attracted the regulator’s attention.