18th November 2015
The City watchdog has launched an investigation into whether consumers are getting good value from investment companies that look after more than £6 trillion in assets.
The Financial Conduct Authority (FCA) today set out the areas it will focus on in its market study into competition in the asset management industry over the next year.
It will be looking at how asset managers compete to deliver value, whether they are motivated and able to control costs along the value chain and what effect investment consultants have on competition for institutional asset management.
In addition, the FCA will look at whether there are any barriers to innovation or technological advances in asset management.
The FCA will consider both retail and institutional investors in this study.
Christopher Woolard, director of strategy and competition at the FCA, says: “Asset managers provide an important economic function, bringing together those with money to invest and companies and governments that need capital. Given the significant role they play in the economy, it is essential that competition works effectively for these services.
“The UK is a world leader in asset management. Our market study aims to ensure that both retail and institutional investors can get value for money when purchasing these services – which we expect to further strengthen the UK’s position as a major centre for asset management.”
Following today’s publication, the FCA will shortly approach market participants for information and data to look into the issues set out above. In addition, the FCA will host roundtables and meetings throughout the study.
The FCA aims to publish interim findings in summer 2016 and a final report by the early 2017. The interim findings will indicate where the FCA has found any areas of concern and explain what they are and how it proposes to address these concerns. The FCA will also set out any areas where few or no problems have been found.
The UK is Europe’s largest asset management market, with around £6.6 trillion invested. This includes around £2.1 trillion of pension fund investments, £1.2 trillion in retail investment products and £0.4 trillion in public sector and charity investments.
There is a further £1 trillion investment in insurance products and £1 trillion invested in non-mainstream asset management products – both of which will include pension fund investments.
The FCA announced its intention to undertake a market study into asset management in its 2015/16 business plan. This followed feedback received as part of the wholesale sector competition review in 2014 which indicated there might be competition issues in asset management.
Other key issues that will be considered by the study include: