Asset managers are steeling for ambitious regulatory demands as the Financial Conduct Authority launches its competition study with data requests that could also impact other parts of the industry.
The regulator confirmed last November that its market study would focus on how fund firms deliver value and how willing they are to control costs along the value chain.
Involved in this is a focus on client relationships, and – given the disintermediated nature of the industry – the expected scale of the FCA’s data demands have caused concern among the firms selected for its sample study.
The demands could oblige fund houses to consult with other parts of the investment chain, including platforms and advisers.
A senior industry figure, speaking on condition of anonymity, said: “The initial concern is over the volume of data that may be required by the FCA. It could bring challenges in terms of how we engage with clients in collating this data.”
The FCA has form on large data requests as part of its competition studies. In reviewing the credit card industry last year, it requested monthly account-level data for 34 million customers and 74 million active accounts stretching back five years.
As well as client-related details, the data required of fund firms is expected to cover areas such as results and performance, along with qualitative aspects such as business structure and approach.
The regulator will begin sending out its full requests to the selected asset managers shortly, having outlined its initial demands as part of a pilot project.
Amanda Rowland, a partner at PwC, said the data requests in the FCA’s pilot had placed fund groups under pressure.
She added: “The request is onerous. It is a large amount of data in a short period of time. It’s ambitious for firms to provide it in this amount of time and for the FCA to absorb it.”
Given the focus of the study, it is expected the FCA will take a keen interest in how fund houses manage client transactions and how this feeds into demonstrating value for money.
Ms Rowland suggested that asset managers will discover they retain most of the data themselves. But she remarked: “I doubt it can all be run off at the flick of a switch.”
Other regulatory consultants have cautioned that the initial requests may not be the end of the matter. Julian Bartlett, a partner at Grant Thornton, said: “My instinct is that the FCA will start [data requests] and then realise they do not meet its requirements.”
This could then lead to additional and more granular data-gathering from the selected asset managers, he implied.
The FCA launched its study in November. It will provide a preliminary report in the summer, with a final report early next year.