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FCA warns cost disclosure not enough to explain value

FCA warns cost disclosure not enough to explain value

The chairman of the Financial Conduct Authority has warned the disclosure of costs and charges is "not enough" to help customers find the best value fund. 

Speaking at the Investment Association's annual dinner last night (October 10) Charles Randell said high fees still took a "heavy toll" on the retirement outcomes of millions of people, as he called on fund managers to do more to help clients who were at "such an information disadvantage". 

He said: "Improvements in costs and charges disclosure - vital as they are - aren’t enough to help fund customers find the best value on their own. It’s just too complicated, and they are at such an information disadvantage compared to you.

"That’s why we’ve stepped in to strengthen fund governance with independent directors and requiring annual assessments of fund value.

"I’m looking forward to seeing these measures make UK authorised funds the best value they can be."

In 2017 the regulator's asset management market study found high levels of profit among asset managers but weak price competition, particularly in active retail funds. 

Despite steps taken by the FCA to remedy these concerns, last night Mr Randell warned the UK was still rated below "a number of our global competitors" for fund fee structures and savers in other countries, such as Sweden and the Netherlands, still "consistently" pay less than British customers. 

The chairman said recent efforts by the FCA to strengthen fund governance do not address the £1trn of assets in unit-linked funds, which hold most pensions.

Mr Randell said: "We’ve recently found the same weak governance and limited consideration of unit-holders’ interests when it comes to value, fees and charges that we saw in the Market Study.

"So we will have to think further about our response to these weaknesses."

He concluded: "So let’s work together to build a truly world-leading investment industry around the outcomes customers need.

"An industry which provides fair returns to the providers of capital. An industry that’s as good as it can be in allocating customers’ money to businesses which can best add sustainable long-term value.

"An industry that is innovative and fiercely competitive, so that its benefits accrue to large investors, small investors, and the whole of society." 

rachel.mortimer@ft.com

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