The Financial Conduct Authority (FCA) has today outlined its plans to reform the asset management market, and said it will add more protections for investors.
The regulator launched a review of the sector in 2015 and in November last year published an interim report which highlighted weak price competition in some areas, a lack of transparency, potential conflicts of interest and sustained profitability among asset managers, despite a large number of companies in the space.
Today, the watchdog recommended remedies in three areas:
To help provide protection for investors who are not well placed to find better value for money, the FCA proposes to:
-strengthen the duty on fund managers to act in the best interests of investors and use the Senior Managers Regime to bring individual focus and accountability to this;
-require fund managers to appoint a minimum of two independent directors to their boards;
-introduce technical changes to improve fairness around the management of share classes and the way in which fund managers profit from investors buying and selling their funds.
To drive competitive pressure on asset managers, the FCA will:
-support the disclosure of a single, all-in-fee to investors;
-support the consistent and standardised disclosure of costs and charges to institutional investors;
-recommend that the DWP remove barriers to pension scheme consolidation and pooling;
-chair a working group to focus on how to make fund objectives more useful and consult on how benchmarks are used and performance reported.
To help improve the effectiveness of intermediaries, the FCA will:
-launch a market study into investment platforms;
-seek views on rejecting the undertakings in lieu of a market investigation reference regarding the institutional advice market to the Competition and Markets Authority;
-recommend that HM Treasury considers bringing investment consultants into the FCA’s regulatory perimeter.
"The asset management sector is important to the economy, managing the savings of millions of people and in the current low interest environment it’s vital we help people earn a return on their savings," said FCA chief exec Andrew Bailey.
"We need a competitive sector, attracting investment into the United Kingdom which also works well for the people who rely on it for their financial wellbeing.
"We have listened carefully to the feedback we received in response to our report last November. We have put together a comprehensive package of reforms that will make competition work better and help both retail and institutional investors to make their money work well for them."