DevDosh Ltd found The Financial Conduct Authority’s recent report Consultation Paper CP17/18 (the CP) and asset Management market Study is striving for better transparency from the asset management industry, with aim of ensuring that the best interests of the clients are met and they are
getting good value for money.
The FCA outlined it’s belief that the industry has become complecent with the amount of money it earns from their customers because of the lack of price competition in certain sectors of the industry, many of the fees charged are avoidably eating away at investors profits.
New measures that the Financial Conduct Authority wants authorized collective investment schemes to introduce include:
- Appointments of Authorized Fund Managers (AFM)
- Appointment of no less than two independent directors to the board, independent directors should make up at least 25% of the board.
- The independent directors should not serve on the board for a time exceeding 5 years.
- The board of the AFM should review on a yearly basis that value for money is being provided to the investors.
- The board should then issue a report on how value for money was given and if not the steps they will take in the future to meet this requirement.
- Failure to do this will result in the company failing to act in the best interest of the client.
For DevDosh Ltd, the points which the FCA wish to deal with are complex in nature and will take a great amount of work from the companies to comply with them properly.
One of the big problems will be clearly defining exactly what constitutes as good value for money without leaving it ambiguous and open to interpretation from the companies themselves, also this will differ from one investor to another on what they believe to be good value for money, the more complicated an investment is the harder it will become to determine this point.
The main difficulty with the FCA’s requirements in this area is that assessing value for money is That assessment will need to include:
- Identifying running costs of the fund and how much of these costs should be passed onto the investor.
- If a point comes when they hit break point (where charges decrease once assets under management reach a certain level) are appropriate, and whether savings should be shared with investors.
- Are the charges involved reasonable compared to what else is available on the market, and how the company justifies these charges.
- AFMs will bbe obliged to tell investors if the fund is not performing and giving value for money
For more information on unregulated collective investment schemes with annual returns of 10% in an asset backed scheme please visit DevDosh Ltd today.