The Financial Conduct Authority (FCA) has announced a major shake-up of the investment management industry to ensure investors get better value for money.
The move follows a year-long investigation by the FCA, which found evidence of weak competition in the market and sustained high profit-taking by investment firms.
The FCA also found that investors are often not clear about the objectives of the funds, and fund performance is not always compared with an appropriate benchmark.
The changes, published today (June 28), follow consultation on the interim report of the FCA’s asset management market study, released in November 2016.
The reforms include:
- Strengthening the duty on fund managers to act in the best interests of investors
- A requirement for fund managers to appoint a minimum of two independent directors to their boards
- Changes to improve fairness over the management of share classes, and the way in which managers profit from investors buying and selling funds.
- A move towards a single, all-in fee for investors;
- Support for standardised disclosure of costs and charges to institutional investors;
- A call for the government to remove barriers to pension scheme consolidation;
- A working group to focus on how to make fund objectives more useful and consult on how benchmarks are used and performance reported.
The FCA will also launch a market study into investment platforms to improve the effectiveness of intermediaries, and recommend the government considers bringing investment consultants under the control of the FCA.
'Ripping off consumers'
However Gina Miller, founding partner of investment company SCM Direct, which has been campaigning for a better deal for investors, criticised the delay in the implementing changes, and said “rules should be brought in straight away to protect savers”.
“While 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,” she said.
“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.
“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.”
Andrew Bailey, chief executive at the FCA said: “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."