The Financial Conduct Authority (FCA) published the final version of its Asset Management Market Study (MS15/2.3) on 28 June 2017, setting out its policy proposals for the UK asset management industry.
The study, which concerns competition issues, has found that there is weak price competition in certain areas. It looks in particular at the operation and governance of UK authorised funds and the role played by investment consultants in UK pension scheme investment. Comments on the wholesale market are relatively limited, though wholesale business will inevitably be affected by various aspects of the study’s findings and proposals.
The FCA intends to:
- strengthen the duty of fund managers to act in the best interests of investors by increasing the role of independent directors, a model already followed by many off-shore funds;
- increase oversight of investment consultants and remove barriers to pension scheme consolidation and pooling;
- encourage standardised disclosure of costs and charges to institutional investors;
- launch a separate market study to examine how competition is working in the investment platform industry;
- institute a working group to consider how investment objectives can be made clear and more useful; and
- make a market investigation reference to the Competition and Markets Authority in respect of the investment consultancy services industry.
While the FCA supports the disclosure of a single all-in fee it has stopped short of making this an actual requirement. In practice the prescriptive new MiFID II costs disclosure rules are likely to go a long way to addressing this objective.
The FCA has issued a consultation paper (CP 17/18) on a number of related issues including:
- how to strengthen the rules on best interests and fund governance;
- changing the rules on box management to disclose box management practices and require risk-free box profits to be passed on to fund investors;
- making it easier for investors to switch to cheaper share classes;
- phasing out trail commissions; and
- whether some of the FCA’s proposals should be extended to life products.