18th November 2016
The financial watchdog the Financial Conduct Authority is to require fund managers to give investors an all in fee for their services amid concerns there is limited competition in the sector.
The FCA chief executive Andrew Bailey says explicitly that the intention of the FCA is to minimise the cost of investment.
The watchdog also says it will also provide investors with the tools to identify persistent under-performance.
An FCA market study launched in November 2015 found that there was only weak competition on price among active asset managers.
Andrew Bailey, chief executive at the FCA said: “Asset managers are responsible for the savings of millions of people in the UK, making decisions which affect their financial well-being both now and in the future.
“In today’s world of persistently low interest rates, it is vital that we do everything possible to enable people to accumulate and earn a return on their savings which can meet their lifetime needs. To achieve this, we need to ensure that competition in asset management works effectively to minimise the cost of investment.
“We want to see greater transparency so that investors can be clear about what they are paying and the impact charges have on their returns. We want asset managers to ensure investors receive value for money through pursuing energetically their duty to act in their customers’ best interests. The remedies that we are proposing today aim to achieve these outcomes.
“Low interest rates are necessary for the economy, but we have to do everything else we can to ease the burden on savers. This is one thing we can do.”
The FCA study found that:
The FCA has proposed a significant package of remedies that seek to make competition work better in this market, and protect those least able to engage actively with their asset manager. These include:
The FCA is also consulting on whether to make a market investigation reference to the Competition and Markets Authority (CMA) on the investment consultancy market and has recommended that HM Treasury considers bringing the provision of institutional investment advice within the FCA’s regulatory perimeter.
In addition, the FCA will undertake further competition work on the retail distribution of funds, particularly in relation to the impact financial advisers and platforms have on value for money.