FCA outlines scope of asset management competition probe
The FCA has revealed the main areas of focus for its market study into competition in the UK’s £6.6trn asset management industry.
Over the next year the regulator will assess how asset managers compete to deliver value and whether they are motivated, and able, to control costs along the value chain.
The City watchdog will also focus on whether there are barriers to innovation or technological advances in asset management, The study will take in both retail and institutional investors.
One area of interest, the FCA said, is the “clustering” of annual management charges for active equity funds around the 1.5 per cent mark, a trend it “will look to understand further”. The 1.5 per cent charge has typically translated into a 0.75 per cent fee post-RDR following the unbundling of charges.
Christopher Woolard, the FCA’s director of strategy and competition, said: “Asset managers provide an important economic function, bringing together those with money to invest and companies and governments that need capital. Given the significant role they play in the economy, it is essential that competition works effectively for these services.
“The UK is a world leader in asset management. Our market study aims to ensure that both retail and institutional investors can get value for money when purchasing these services – which we expect to further strengthen the UK’s position as a major centre for asset management.”
The FCA aims to publish interim findings in summer 2016, with a final report due by early 2017.
The interim findings will indicate where the regulator has found any areas of concern and how it proposes to address these.
“If competition is not working well, we may intervene to promote effective competition. We can do this through rule-making, introducing firm-specific remedies or enforcement action, publishing general guidance or proposing enhanced industry self-regulation,” the terms of reference said.
The FCA’s intention to carry out the market study was announced in its 2015/2016 business plan, after feedback to a 2014 wholesale sector competition review indicated there may be competition issues in asset management.
