The financial watchdog’s director of strategy has branded competition within the asset management industry “a market failure”, after carrying out an interim report into its workings.
Speaking at the Tax Incentivised Savings Association’s (TISA) annual conference, Chris Woolard of the Financial Conduct Authority (FCA), said: “We are for the first time proposing to use our powers to make a market investigation reference under the Enterprise Act to the Competition and Markets Authority on the institutional investment advice market.”
Last week, the FCA put forward its plans for a shake-up of the £7 trillion asset management industry to get investors a better deal, such as introducing an "all-in" fee approach where changes are quoted so investors can see where their money is going, and note what is being taken from the fund.
Woolard said the report was “probably the most significant piece of competition work” the FCA had undertaken and flagged that investment consultants, were on average, not able to identify managers who offer better returns to investors.
The watchdog also has concerns over whether the interests of investment consultants are in line with investors’ interests.
Above all, Woolard warned that the report was indicative of “a market failure in the economic sense”, though the FCA expects the industry to engage with the analysis and make positive changes.
“Asset managers are entrusted with a very clear social responsibility to the nations’ savers – our job as the regulator is to make sure that it is an efficient and effective market that serves the interests of these savers,” he said.