When multiple intermediaries participate in an investment management transaction, there is the potential for a conflict of interest between providers and buyers of the service, in a well documented sequence described in economic theory as the principal–agent problem.
This regime is under regulatory and competitive pressure because it privileges large, sophisticated investors at the cost of the choice available to the relatively worse-off, and because incentives are against the most vulnerable element of the chain.
The FCA (UK), have implemented the "treating customers fairly" policy,[1] with wide-ranging reforms such as the Retail Distribution Review,[2] gradually banning "kickbacks" whereby providers of investment management services reward "independent" advisers who place their products.
[3] Rather than the symptom – kickbacks[4][5] and inadequate advice – new competitors tackle the issue – multiple intermediaries – by disrupting the intermediation chain.
[6] Propositions leverage the reach of the Internet to pair a central provider of investment management services with end-customers online.
The first completely P2P provider is Darwinex (UK) that is an FCA-approved FX broker and asset manager, which offers copy trading to its users.
P2P asset management offers the potential benefit vs. centralized providers that all participants crowdsource strategies that are independently rated in a competitive set-up.
Further, permission is required for "Arranging safeguarding and administration of assets",[15] which grants investors protection under the FCA Client Money Rules.
Traditional providers of financial services potentially suffering this conflict claim to overcome it by enforcing a Chinese wall.