Examining the asset management sector
They will spend the next year reviewing various aspects of this sector, including how asset managers compete to deliver value; whether asset managers are motivated and able to control costs along the value chain; and what effect investment consultants have on competition for institutional asset management.
The FCA will also be examining whether there are any barriers to innovation and/or technological advances in asset management.
This study will consider both retail and institutional investors.
Launching the market study, Christopher Woolard, director of strategy and competition at the FCA, said:
“Asset managers provide an important economic function, bringing together those with money to invest and companies and governments that need capital. Given the significant role they play in the economy, it is essential that competition works effectively for these services.
“The UK is a world leader in asset management. Our market study aims to ensure that both retail and institutional investors can get value for money when purchasing these services – which we expect to further strengthen the UK’s position as a major centre for asset management.”
The market study is expected to include a review of information and data provided by asset managers, as well as roundtable discussions and meetings hosted by the FCA.
We expect to see interim findings from the market study next summer, followed by the publication of a final report in the early part of 2017.
This is a really important area for the FCA to consider.
The UK is Europe’s largest asset management market, with around £6.6 trillion invested.
This includes around £2.1 trillion of pension fund investments, £1.2 trillion in retail investment products and £0.4 trillion in public sector and charity investments.
There is a further £1 trillion investment in insurance products and £1 trillion invested in non-mainstream asset management products – both of which will include pension fund investments.
When the FCA published their business plan for 2015/16, they indicated a priority to look at the asset management sector, in particular whether there might be competition issues.
This followed feedback from a previous study hinting at the difficulty investors have in making sure they are getting value for money and in monitoring the performance of asset managers.
Concerns were also raised about the role of investment consultants and potential conflicts of interest arising from the provision of advice and asset management services
the incentives and ability of asset managers to control costs incurred on behalf of investors.
Finally, there are potential issues around the bundling of ancillary services and the quality of some of the services provided.
We look forward to reading the interim report when it is published next summer and seeing what issues the FCA are starting to identify.