The Evidence-Based Investor

UK regulator sets out steps to boost competition in asset management

Posted by Robin Powell on April 5, 2018

The Financial Conduct Authority has today announced a series of measures aimed at addressing the concerns set out in its report on competition in UK asset management. It says the measures are “part of a package of remedies to ensure fund managers compete on the value they deliver, and act in the interests of the millions who entrust them with their savings.”

They include:

— a requirement for fund managers to make an annual assessment of the value their funds provide;

 — a requirement for firms to appoint a minimum of two independent directors to their boards;

— making senior managers more accountable for ensuring that firms act in the best interests of their clients; and

 — technical changes to facilitate the movement of investors into cheaper share classes.

Commenting on the announcement, the FCA’s Executive Director Christopher Woolard said the steps set out are “an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.”

Kevin Doran, chief investment officer at the online investment service AJ Bell, welcomed the announcement. “For far too long,” he told the FT, “many fund providers seem to have forgotten just whose money it is they manage, hiding behind vague objectives and excessive charges.”

 

Whose money is it?

 

My Transparency Task Force colleague Andy Agathangelou was also positive. “I particularly like the requirement for greater accountability for senior decision-makers,” he said, “because I’m a firm believer in the idea that ‘accountability cures’. Culture is key and it is crystal clear the FCA fully understand that.

“I also like the way the FCA have given themselves licence to tighten the noose in key areas if they need to. A good example is the way the Independent Directors role is going to be played out; the FCA have the capacity to raise the bar as and when they need to, and that’s an intelligent approach.”

Mick McAteer, head of the Financial Inclusion Centre, however, was less impressed. He told the FT: “It’s a bit of a damp squib [and] very unlikely to lead to significant improvements in the asset management industry. The stuff on governance is OK but [there is] still no requirement to have an independent chair.”

My own view lies somewhere between Andy and Mick’s. Yes, it’s a step in the right direction, but if there’s one thing I’ve learned from campaigning on this issue over the years, it’s that we mustn’t underestimate the strength of the industry lobby.

The Investment Association and most of its members, aided and abetted by the trade press, will continue to pretend that lack of competition in asset management has been overblown. They will try to hold back the tide of progress for as long as they can.

It is, though, a war they will ultimately lose. Slowly but surely we’re moving towards a better, fairer investing industry — and credit is due to the UK regulator for the part it’s playing in that process.

 

You can read the FCA’s announcement here:

FCA sets out next steps to improve competition in the UK’s asset management industry

 

ROBIN POWELL is the founder and editor of The Evidence-Based Investor. A freelance journalist, he runs Regis Media, a specialist content marketing consultancy for financial advice firms around the world. You can follow him on Twitter and on LinkedIn.

The Evidence-Based Investor is produced by Regis Media, a boutique provider of content and social media management to financial advice firms around the world. For more information, visit our website and YouTube channel, or email Sam Willet or Christina Waider.

 

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Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector. Regis Media.

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