The Financial Conduct Authority (FCA) is to investigate high and complex fund management charges during its first year of existence.
Investment Adviser reported in October that fund charges would be a key focus for the regulator if the RDR fails to put sufficient pressure on fund managers to reduce the costs of their products.
The new regulator - which comes into existence next week - warned in its first business plan, published today, that charging structures “do not promote informed consumer choice”.
The FCA also said fee structures may “exploit consumers’ behavioural bias”, making it difficult for investors to compare products.
It said: “In the asset management sector fund fees have increased in the last decade, additional ‘hidden’ fees have increased and overall charging structures have become more complex as performance fees have become more common.
“In 2013/14 we will undertake a project that will highlight the behaviours and practices of asset management firms in relation to charging structures that harm consumers.”
The Investment Management Association has been attempting to deflect criticism for high charges by urging member firms to improve disclosure of different levels of costs, such as entry and exit fees, annual management charges and ongoing charges.
However, fund providers have come under intensive scrutiny in recent weeks after it was claimed that some managers could be ‘dumping’ up to £1bn in costs onto investors, including research and brokerage commissions.
In addition, earlier this month Investment Adviser revealed that some companies were able to make money - known as ‘box profits’ - from the daily trading of dual-priced unit trusts.
