As annual events go, the release of the FCA’s business plan was never going to be the most glamorous. But last week the regulator had a go at increasing the fanfare by launching its ‘mission’ alongside the plan.
Add to this the consultation on regulatory fees, and it was little surprise that one of the most interesting indicators for the investment industry was drowned out by the sheer variety of documentation released last week.
This wasn’t to be found in the business plan, or the mission, or the fees consultation. It was part of the ‘sector views’ paper, and read as follows: “Although prices in various areas of the [retail investment] sector seem to be clustered around certain levels, our analysis suggests this is mostly the result of poor competitive pressures exercised by the demand side.”
The comment isn’t exactly a smoking gun. But it does speak to both the past (the conclusions of the asset management market study now being finalised after months of work) and the future – specifically, those now in the regulator’s sights.
The “clustering” of asset management charges was one of the most high-profile issues to arise from the market study. In many ways it was the focal point of the entire investigation: is competition flourishing in the active management industry for the good of the consumer?
This is clearly an issue of importance to the FCA, though its unwillingness to regulate prices directly does limit its options. That’s why the study’s interim report was characterised by very critical language but a lack of truly earth-shattering reforms.
Regardless, the statement last week is evidence the watchdog’s search for solutions is pivoting away from a focus on supply, meaning the asset management industry, in favour of demand – platforms, advisers and fund buyers of all stripes.
There were early indications of this in last November’s report, some of which are now starting to solidify. The announcement of a market study into investment platforms is one indication. By extension, so too is the suggestion that advisers’ pricing lacks transparency. True, this concern extends beyond how much intermediaries pay for investment products, but that will be part of it.
It’s going to be some time before we will see the results of this retrained focus. The platform market study will not begin until the end of 2017 at the earliest, and it feels like more work on fund buyers has yet to emerge.
Platforms, discretionary fund managers and intermediaries alike will say that price is not always their overriding consideration: it’s about service and investment performance. The regulator will suggest the consumer might disagree.
It’s likely to be another drawn-out battle, and one that means fee pressure isn’t going away any time soon.