Britain’s financial regulator is to investigate whether asset managers deliver value to investors, companies and governments as a key part of its review into the UK’s £6.6 trillion fund management industry.
The Financial Conduct Authority (FCA) said yesterday that it would also review the market to see whether asset managers were “motivated”, able to control costs, and how investment consultants affect competition in the industry.
Christopher Woolard, the FCA’s strategy and competition director, said: “The UK is a world leader in asset management.
“Our market study aims to ensure that both retail and institutional investors can get value for money when purchasing these services – which we expect to further strengthen the UK’s position as a major centre for asset management.”
The FCA, set up in 2013 with a remit including financial markets and investor protection, first announced its intention to launch a review into the asset management sector in its 2015/16 business plan.
This followed feedback to a wholesale financial sector review in 2014 which raised possible competition issues in asset management.These included the difficulty investors have in ensuring they get value for money and in monitoring the performance of fund managers; the role of investment consultants and “potential conflicts of interest” arising from the provision of advice and asset management services; the incentives and ability of asset managers to control costs incurred on behalf of investors.
Another issue identified was “the bundling of ancillary services and the quality of some of the services provided”, the FCA said.
Woolard commented: “Asset managers provided an important economic function, bringing together those with money to invest and companies and governments that need capital.
“Given the significant role they play in the economy, it is essential that competition works effectively for these services.”
The FCA, which will include both retail and institutional investors in the study, also said it would examine where there are “any barriers to innovation and/or technological advances in asset management”.
The regulaor, which is to host meetings and roundtables throughout the study, will report its interim findings in summer 2016, and a final report in early 2017.
It comes against a backcloth of governments across Europe wanting their ageing populations to feel confident about saving more for their retirement via pension contributions invested in the stock market.