FCA publishes proposals to reform asset management industry
Britain's financial regulator has tabled sweeping reforms aimed at overhauling the country's asset management industry.
The Financial Conduct Authority (FCA) published the final findings of its study into the sector on Wednesday, detailing a series of concerns.
The watchdog found that price competition is weak, investors are not always clear what the objectives of funds are, and fund performance is not always reported against an "appropriate benchmark".
The FCA added that despite a large number of firms operating in the market, there is evidence of sustained high profits over a number of years and there were concerns about the way the investment consultant market operates.
As a result, it is proposing a series of remedies including supporting the disclosure of a single, "all-in" fee to investors, as well as the "consistent and standardised disclosure" of costs and charges to institutional investors.
The FCA also wants to strengthen the duty on fund managers to act in the best interests of investors, using the Senior Managers Regime to bring individual accountability.
Fund managers will also be required to appoint a minimum of two independent directors to their boards, introduce technical changes to improve fairness around the management of share classes, and examine the way fund managers profit from investors buying and selling their funds.
FCA chief executive Andrew Bailey said: "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.
"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."
Shares in listed fund managers were among the biggest fallers in morning trading.
Hargreavees Lansdown was down 3% to 1,297p, St James's Place fell 1.1% to 1,171p and Scottish Mortgage Investment Trust dropped 1.63% to 407.2p.
Aberdeen Asset Management was down a modest 0.6% to 292.7p, while Schroders fell 0.4% to 3,091p.
Aberdeen boss Martin Gilbert welcomed the FCA's study, saying it "provides clear guidance" on how the FCA wants the industry to operate in future.
"I have stated several times that I am in favour of all-in fees including all costs as the industry has an obligation to deliver what the customer wants," he said.
"Incorporating dealing charges for equity funds should be straightforward, particularly for those managers, like ourselves, who have low portfolio turnover. It is more challenging to calculate all-in fees for bond funds, but I'm encouraged the industry is already looking at ways of doing this."
However, SCM Direct, the investment boutique founded by anti-Brexit campaigner Gina Miller and her husband Alan, accused the FCA of "dragging its feet".
"Whilst the FCA is finally pursuing a pro-consumer agenda it is disappointing that they still appear to be dragging their feet on some key aspects.
"The UK investment industry has been ripping off the consumer for decades and it is time for the UK regulator to act now rather than have further consultations with the industry and its shoddy trade bodies," the firm said.
"Consistent and standardised fee disclosure in a single number is vital for ordinary investors to make better choices. This should be mandated by the FCA to retail and institutional investors alike rather than just institutional investors or it is inevitable that differing formats by investment groups will make easy comparisons impossible."