The United Kingdom Financial Conduct Authority will scrutinize costs and value for money in a study targeting competition in the asset management industry, as the market becomes the latest in financial services to face a potential shake-up.
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The probe launched today will look at whether competition is functioning properly so that investors such as pension schemes are able to get value for money from their service providers.
EY’s Gill Lofts, the United Kingdom head of wealth and asset management thinks it’s timely due to the importance of the asset management sector to the United Kingdom economy. One of its focuses will be on the clustering of annual management charges around 1.5% for active equity funds. The interim report 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 hope for this FCA review is that the focus lies squarely with helping to create better outcomes for consumers saving for their retirement, and is not an exercise of gold plating the regulation of asset managers in the United Kingdom”, says Loft.
The FCA announced in February that it planned to investigate the sector to make sure customers were getting value for the charges they pay to fund managers. “We will also seek to understand arrangements between the investment consultant and the asset managers who are part of fund-of-funds or multi-managers and the impact arrangements have on competition”.
How does advice given by investment consultants affect competition for asset management?
Can clients monitor services provided by consultants?
The FCA will also look at whether there are any barriers to innovation and technological advances in the asset management industry.
Kick-starting the study, the FCA will approach market participants for information and data.
After speaking to members of industry and other relevant parties, the FCA will aim to publish preliminary findings next summer, and a final report in early 2017.
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A preliminary review earlier this year raised issues about the 13 billion pounds the sector collects annually in fees, swallowing chunks of returns in a few cases.
