The FCA has published its 2019 Sector Views which provides an annual analysis of the changing financial services landscape and impacts on consumers and markets. In the cross-sector themes section of the report, the FCA examines common drivers of change emerging across the industry with a focus on:

  • technology led changes;
  • societal changes and their impact on financial needs of different generations;
  • the potential impact of Brexit; and
  • the macroeconomic environment.

In the section of the report on the investment management sector, the FCA highlights that in recent years, the biggest drivers of change have been:

  • the low interest rate environment;
  • significant regulatory change and scrutiny;
  • policy changes; and
  • technological developments.

For passporting and delegation, the FCA notes that Brexit has been an increasingly important factor. The FCA’s main concerns in this sector continue to be unsuitable products and services, high charges, and low quality products and services. It states that these, as well as consumer harm caused by financial or data loss from financial and cyber crime, could have knock-on effects for confidence and participation.

Two main areas of challenges in the investment management sector which the FCA singles out are:

(1) the pricing and quality of services provided in the areas of asset management, institutional intermediaries and advice, and custody and investment administration; and

(2) threats to the stability and resilience of the UK’s financial markets through the oversight problems caused by automation in the financial services industry and greater outsourcing. The technology-linked risks are covered in our related blog: Technology high on the FCA's radar for investment managers.

The FCA welcomes comments on the paper to improve future editions and its business planning.