The Financial Conduct Authority (FCA) is considering a review of the asset management sector that would look at how buyers of products receive value for money.
The regulator revealed its thinking last week when it announced plans for a separate study into investment and corporate banking competition.
The banking study flows from another recent study of competition in the wholesale financial services sector, which is where the idea for the asset management review came from.
During the wholesale review, the FCA met with around 70 organisations and individuals through a combination of roundtables and one-to-one meetings, and received 40 written responses. The regulator said the possibility of a review into asset management resulted from feedback on other potential competition issues.
The possibility of the asset management review prompted a call for fairer fees. Alvin Mok, global manager at a direct-to-consumer online investment platform, Orbis Access, welcomes the possibility of a review, and notes a recent report from Cass Business School that found fund fees are skewed in the interest of fund managers and that managers should consider adopting a fee structure that better aligns investors’ and managers’ interests by sharing losses as well as gains.
“At present, 98% of retail funds offer the same type of fee structure – a fixed fee as a proportion of assets under management. We believe investors should be provided with more choice,” Mok says.
The wholesale review found that: “limited clarity over price and quality of services may make it difficult for clients to assess whether they are getting value for money”.
Bundling and cross selling of services could also make it difficult for new entrants or smaller established firms to challenge established large players in the market, the FCA said.
As well as asset management, the FCA said the vertical integration of clearing and execution services may also be reviewed.
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