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Home > Opinion > Tony Hazell

The FCA: A better regime?

The Financial Conduct Authority may still be in its embryonic stages but for the second time in a month its chief executive designate, Martin Wheatley, has been caught talking sense.

By Tony Hazell | Published Oct 03, 2012 | comments

First bankers got a roasting over sales incentives, now fund managers have been given a bony elbow to nudge them in the right direction.

For those of us who observed the catatonic early years of the FSA this is refreshing indeed. It seems the FCA could actually hit the ground running rather than stumble over through too much gazing at its navel.

This must be good news for both consumer and industry.

Mr Wheatley’s latest round of plain speaking, at last week’s FSA’s Asset Management Conference will, I suspect, have led to more than a little uncomfortable fidgeting.

As with banks he made it very clear that the people at the top of organisations will in future be held more personally responsible for their organisation’s conduct.

And he also had a thing or two to say about charges and the appearance that competition may not be working.

How, he pondered, can it be that across actively managed products the levels of charging appear broadly similar?

And he questioned how some supposedly actively managed funds could hold a make-up broadly similar to a much cheaper tracker. The clear intimation was: are investors being led up the garden path?

He added: “Failures in competition impact us all as end-consumers because they reduce the investment returns that we rely on.”

I hope you all see where he is going here. For those who don’t, he pointed out the thousands of pounds that can be knocked off return by small differences in charges.

And he raised another decent point suggesting that consumers are being confused by too much competition in this industry.

This would certainly seem to be the case among the fund managers that, when they wish to raise money, invent a fad and launch a fund rather than addressing the failings of their existing stable.

Take a look at this quote: “Consumers may be over-responsive to reported past performance; they may seek to avoid realising losses; and, they may anchor their thinking on irrelevant information. Barriers to switching and poor disclosure could lead consumers to take the wrong decisions, and may be examples of the industry not delivering what is in the interests of its customers.”

Do not be in any doubt. This was a shot across the bows of a fund management industry that has lived a cosy life at the consumer’s expense for far too long.

This was a shot across the bows of a fund management industry that has lived a cosy life at the consumer’s expense for far too long

We have already seen the shape of things to come with a ban first, investigate later approach when consumers are in danger of being “ripped-off” – Mr Wheatley’s words, I hasten to add.

The signs are that the FCA will be a tougher but clearer, more open and, dare I say it, a better regime than the FSA was, certainly in its early years.

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