The FCA has issued its interim report on its asset management study, highlighting evidence of weak price competition, which affects investors’ investment returns.
In this interim report, the Financial Conduct Authority states that it has found evidence to suggest that there is weak price competition in a number of areas in the industry, impacting both retail and institutional investors’ investment returns. The FCA has proposed a series of measures it could impose on asset management products and services to ensure that the market works properly and that the products used by consumers offer value for money. The UK’s asset management industry is the second largest in the world, with £6.9 trillion of assets under management. The FCA decided to conduct a market study as it seems the investor bears virtually all the risk.
The FCA has proposed a package of remedies to improve competition in the market, which are intended to increase investor awareness and scrutiny of charges and slow the speed of the market’s travel towards passive funds. The proposals include:
- a strengthened duty on asset managers to act in the best interests of investors;
- introducing an all-in fee approach to quoting charges, and increasing cost transparency, standardisation and communication;
- measures to assist retail investors to make the right decisions when choosing funds or when switching between share classes;
- exploring with the government the benefits of increasing the pooling of pension scheme assets; and
- recommending that HM Treasury considers bringing the provision of institutional investment advice within the FCA’s regulatory perimeter.
The FCA is also considering making a reference to the Competition and Markets Authority on the investment consultancy market.
The final report is expected in Q2 2017 meaning firms may well need to address these measures, implement MiFID II and prepare for Brexit simultaneously.