FCA asset management study - interim findings

​The FCA has published its interim findings on its asset management market study.

The FCA has today (18 November 2016) published its interim findings of its asset management market study. This market study was launched in November 2015 in order to understand whether competition was working effectively in the asset management sector and whether institutional and retail investors are getting value for money when purchasing asset management services.

The market study was expected to focus on how asset managers compete to deliver value, whether asset managers are willing and able to control costs and quality along the value chain and how investment consultants affect competition for institutional asset management. This is the first time the FCA has considered in detail the asset management industry through its competition lens.

The FCA sought information from a number of market participants through this process, including 37 asset managers, 13 investment consultants and eight platforms. It also collected information and views from adviser networks, industry groups and surveyed 2,500 non-advised retail investors.

Highlights of the interim findings

  • Price competition is weak in a number of areas of the industry - it is difficult for investors to switch or negotiate on price.
  • There is a lack of transparency in how transaction costs, objectives and outcomes are communicated to investors.
  • The FCA has proposed a significant package of remedies, which include:
    • a strengthened duty on asset managers to act in the best interests of investors
    • requiring clearer communication of fund charges and their impact at the point of sale and in communication to retail investors
    • requiring increased transparency and standardisation of costs and charges information for institutional investors
    • introducing an all-in fee to make it easy for investors to see what is being taken from the fund
    • measures to help retail investors identify the most appropriate fund
    • exploring with government the potential benefits of greater pooling of pension scheme assets, and
    • recommending that HM Treasury also considers bringing the provision of institutional investment advice within the FCA’s regulatory perimeter.
  • The FCA is also consulting on whether to make a market investigation reference to the CMA on the institutional investment advice market. If the CMA did investigate this market, this would result in a further in-depth probe of investment consultants and how they fit in to the wider industry.

Next steps

Simmons & Simmons and Oxera will host a Webinar session early next week for clients in order to provide a more detailed commentary on the matters highlighted by the FCA’s interim findings.

The FCA is currently consulting on its interim findings, including its proposed remedies. We would be happy to discuss any aspect of the FCA’s interim findings and share with you our experience on how best to respond to and engage with the regulator. The FCA’s consultation will close on 20 February 2017.

The FCA’s final report in respect of the asset management market study, including confirmation of any remedies, is expected in Q2 2017.

Update

"A recording of our asset management marketing study client call and a more detailed analysis is available.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.