Mary Starks, director of competition at the Financial Conduct Authority, has defended the approach of the regulator on its asset management market study.
The FCA announced its intention to undertake a market study into asset management in their 2015 to 2016 business plan, following feedback received as part of the wholesale sector competition review.
The feedback raised a number of questions about the asset management value chain.
Speaking at an event held in London by the Transparency Task Force today, Ms Starks said one of the questions she gets asked is why the regulator is coming at this industry from a competition perspective.
Ms Starks said: “People ask me - not unreasonably - there are over 2,000 firms in this space, how can there possibly be a competition problem?”
She defended the FCA’s stance on competition, as she stated there were two very important things to say in this regard.
“The first is that a large number of competitors itself does not, of itself, make for effective competition.
A large number of competitors itself does not, of itself, make for effective competition. Mary Starks“Effective competition requires two things, it requires informed and engaged and empowered buyers... there are some serious challenges to being an effective buyer in asset management services.
“It also requires a market that is open to entering innovation.”
Ms Starks said the second thing to emphasise about why the FCA is looking at competition is that the regulator is not thinking about competition in isolation.
She said the regulator is very mindful of all of its three objectives, which also includes market integrity and consumer protection.
She said that the regulator is looking holistically at the picture and is very conscious that the asset management industry has experienced a number of regulatory challenges in recent years.
Additionally, Ms Starks said that the asset management industry touches the lives of millions in the UK and used to touch on a smaller proportion of the population than it does now.
“Of the £6 trillion under management a third of that is pension fund investments and a sixth is retail fund investments - there is a lot of people very directly affected so given how big, how important and how many people are affected it is really important that this market works well, that competition is effective in driving outcomes, efficiency, innovation, quality of service and value for money.
“Our view is that even a small improvement, an increase in leanness and meanness if you like, could really mean very significant gains for investors.”
ruth.gillbe@ft.com
