FCA Proposes Investor Fee Shake-Up in Funds

Britain’s £7 trillion ($8.67 trillion) asset management sector offers investors poor value for money due to weak competition and too little transparency in fees, the industry regulator said on Friday.

The Financial Conduct Authority has proposed a single fee for investors in funds, and launched a consultation into whether the investment consultancy market, which advises funds on asset manager selection and investment products, should be referred to Britain’s Competition and Markets Authority for a full blown anti-trust probe, Reuters reported.

“We want asset managers to ensure investors receive value for money through pursuing energetically their duty to act in their customers’ best interests,” FCA Chief Executive Andrew Bailey said in a statement to unveil interim results of the watchdog’s year-long investigation into the sector.

Despite a large number of firms operating in the market, the asset management sector as a whole has enjoyed sustained, high profits over a number of years, the FCA said.

“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,” Bailey said.

The FCA found “limited” competition in actively managed funds, meaning investors often pay high charges.

“On average, these costs are not justified by higher returns,” the FCA said.

The watchdog has proposed what it called a “significant package of measures”, including a stronger duty on asset managers to act in the best interests of investors.

It has proposed an “all-in” fee so that investors in funds can easily see what is being taken from the fund in charges.

It has also recommended that Britain’s Finance Ministry consider bringing the provision of institutional investment advice under the FCA’s remit.

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