Financial Conduct Authority  

FCA backs further cost disclosure work

FCA backs further cost disclosure work

The Financial Conduct Authority has said it would welcome an extension of standards for disclosing costs and charges to asset classes "not yet tackled". 

Yesterday (May 21) the Cost Transparency Initiative released templates and guidance aimed at asset managers, and other suppliers of services to pension schemes, which can be used to produce standardised information about their cost and charges to schemes.

The framework will allow pension scheme trustees to make clear cost comparisons across different investment platforms, enabling them to challenge asset managers on cost and performance with an aim to get better value for their clients.

In a statement published today (May 22) the FCA said it welcomed the launch and would like to see the standards extended further across the industry. 

Christopher Woolard, executive director of strategy and competition at the FCA, said the regulator is keen to see the "positive momentum" on greater transparency continue.

He said: "We will be watching to see asset manager and service provider uptake which should ultimately lead to better investor outcomes.

"We are also pleased with the CTI’s ambition and welcome their intention to extend the standards into asset classes and service types not yet tackled."

The templates have been designed to be machine readable, meaning data can be easily extracted and processed, and the CTI has set expectations for asset managers to be in a position to report against December 2019 and April 2020 year-ends using the new templates and tools. 

Mr Woolard added: "Institutional investors are now provided with the tools to give them a clearer and more detailed understanding of the charges of their investments.

"It is good to see investors working with industry to design a framework that can be a success for all."

Mike Lacey, partner at Berkshire-based financial adviser firm Bowman Pension Consulting, said anything that reduces the impact of "charges in the financial supply chain" should be welcomed.

He said: "There is without doubt fat that can be trimmed from costs, which should lead to better returns to investors. Fees and charges should be constantly scrutinised.

"My only slight concern is that profitability should not be reduced by too great a margin.

"I have no problem with reasonable profitability – providers, managers and the like need to make a profit in order to remain in business, deliver acceptable and improving levels of service, and be around for the future."

The CTI was launched in November last year as an independent group working to improve cost transparency for institutional investors, supported by the Pensions and Lifetime Savings Association, the Investment Association, and the Local Government Pension Scheme Advisory Board. 

The FCA said it would continue in its role as an observer on the CTI board, promising to "reconsider" the issue of disclosure to institutional investors in the future if given any reason to be concerned about the effectiveness of the initiative.