FCA asset management study is a ‘positive step’
05 April 2018 London
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The Financial Conduct Authority (FCA) Asset Management Market Study Final Report brings “greater clarity and priority to the The Packaged Retail and Insurance-based Investment Products (PRIIPs) and the second Markets in Financial Instruments Directive (MiFID II) implementation work carried out by asset managers”, according to Alexander Dorfmann, director of product management on the financial data side of SIX.
Dorfmann suggested that the publishing of firm policy direction is “a positive step”.
Dorfman added that the study reinforced “the importance of adopting flexible compliance systems that can be adjusted in response to any recommended changes and clarifications”.
The FCA launched its market study into asset management in November 2015.
It said: “We looked at the asset management sector because we want to ensure that the market works well and the investment products consumers use offer value for money. Improvements in value for money could have a significant impact on pension and saving pots. We find weak price competition in a number of areas of the asset management industry.”
It found that performance wise, there was no clear relationship between charges and the gross performance of retail active funds in the UK, in particular.
It also stated: “We found some evidence of persistent poor performance of funds. However, we also noted that worse performing funds were more likely to be closed or merged into better performing funds.”
The authority explained that it had “concerns about how asset managers communicate their objectives and investors” awareness and focus on charges, which it said was “mixed and often poor”.
The report also found that pension trustees find it difficult to scrutinise the performance of their
fiduciary manager because there is very little public reporting and scrutiny of fiduciary management fees and performance, making it difficult for investors to assess the performance of fiduciary managers and compare them, both at the point of sale and on an ongoing basis.
The FCA reported that, alongside the release of the asset management report had released another interim report to make a market investigation reference to the Capital Market Authority in relation to the provision of investment consultancy services.
Dorfman said that this awareness from the FCA could only help the industry especially in terms of regulation.
He concluded: “Asset managers that embrace a more strategic approach to investor protection and align their compliance efforts will be best placed to react not only to the FCA’s suggestions, but to any future recommendations made from other local regulators across Europe.”
Dorfmann suggested that the publishing of firm policy direction is “a positive step”.
Dorfman added that the study reinforced “the importance of adopting flexible compliance systems that can be adjusted in response to any recommended changes and clarifications”.
The FCA launched its market study into asset management in November 2015.
It said: “We looked at the asset management sector because we want to ensure that the market works well and the investment products consumers use offer value for money. Improvements in value for money could have a significant impact on pension and saving pots. We find weak price competition in a number of areas of the asset management industry.”
It found that performance wise, there was no clear relationship between charges and the gross performance of retail active funds in the UK, in particular.
It also stated: “We found some evidence of persistent poor performance of funds. However, we also noted that worse performing funds were more likely to be closed or merged into better performing funds.”
The authority explained that it had “concerns about how asset managers communicate their objectives and investors” awareness and focus on charges, which it said was “mixed and often poor”.
The report also found that pension trustees find it difficult to scrutinise the performance of their
fiduciary manager because there is very little public reporting and scrutiny of fiduciary management fees and performance, making it difficult for investors to assess the performance of fiduciary managers and compare them, both at the point of sale and on an ongoing basis.
The FCA reported that, alongside the release of the asset management report had released another interim report to make a market investigation reference to the Capital Market Authority in relation to the provision of investment consultancy services.
Dorfman said that this awareness from the FCA could only help the industry especially in terms of regulation.
He concluded: “Asset managers that embrace a more strategic approach to investor protection and align their compliance efforts will be best placed to react not only to the FCA’s suggestions, but to any future recommendations made from other local regulators across Europe.”
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