Improving competition in the UK’s asset management industry
Are you getting good value for money from your asset manager?
The Financial Conduct Authority (FCA) has published the latest step in its response to concerns identified through its asset management market study.
The response is part of a package of remedies designed to ensure fund managers compete on the value they deliver.
It also aims to make sure asset managers act in the interests of the millions who entrust them with their savings.
The measures published by the FCA include:
-Final rules following a previous consultation, focused on the duties of fund managers as the agents of investors in their funds
-A consultation on proposed rules and guidance, focused on improving the information that investors get about funds
The package of measures are designed to address concerns originally outlined last June, in the FCA’s final report of the asset management market study.
The FCA believes they are an important part of a wider package to improve competition in the asset management sector for consumers.
The final rules and guidance cover:
-a requirement for fund managers to make an annual assessment of value, as part of their duty to act in the best interests of the investors in their funds
-a requirement for fund managers to appoint a minimum of two independent directors to their boards
-the introduction of a new prescribed responsibility under the Senior Managers and Certification Regime to bring individual focus and accountability
-technical changes to (i) improve fairness around the way in which fund managers profit from investors buying and selling their funds and (ii) facilitate the movement of investors into cheaper share classes
-These measures will deliver better protection for all investors, both those who are actively engaged with their investments and those who don’t follow their investments closely.
To address its concerns that even actively engaged investors do not find it easy to choose which fund is right for them, the FCA is today publishing a further consultation on remedies related to funds providing better information about what they are offering.
This includes proposals on:
-how fund objectives can be expressed more clearly and be more useful to investors
-making it clearer when funds are benchmark-constrained, or limited in how far their holdings can differ from the weightings of a benchmark index
-ensuring that where a fund uses one or more benchmarks, this is disclosed consistently and explained to investors
The FCA has also today published an Occasional Paper setting out the results of behavioural research which looked at how different ways of presenting information about charges affected investors’ decision-making and their understanding and awareness of charges.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:
The investment choices open to people, and the decisions they make on how to invest, can have a profound impact on their financial health. They can also have consequences for their families, as well as society as a whole.
That’s why it is important the asset management industry, which looks after the savings of millions of investors, is working as well as possible. But our market study found evidence of weak price competition in a number of areas.
Today’s announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.
Firms covered by the new rules have (what we feel is a rather generous) 18 months to implement these measures for an assessment of value, as well as appointing independent board directors.
Asset managers have 12 months to implement the rules related to the way in which fund managers profit from investors buying and selling their funds.
Whilst we believe these are positive steps which should improve outcomes from investors, the FCA could have taken more decisive action and implemented the rules sooner.
The FCA decision today not to ban legacy (pre-Retail Distribution Review) trail commission was a missed opportunity to modernise the fee structure for all investors, ensuring money isn’t unnecessarily taken out of investment charges on funds sold before the end of 2012.Are you getting good value for money from your asset manager? Click To Tweet