DevDosh Ltd covered some Investment firms in the UK have been waiting with baited breath for the latest report from the Financial Conduct Authority detailing their findings on the current practices of the asset management sector, this report was expected to be precise, unambiguous and the conclusive report on the 7 trillion pound industry.
Unfortunately it is the opinion of many within the asset management industry this is not the case.
Though the report is a massive heads up that the industry can be sure of cataclysmic changes in the not too distant future, what these changes will be and when they will take place is anybody’s guess.
This report is the culmination of a two year report of the asset management industry with executives unsure of what the upshot will be regarding the business they have conducted thus far.
In the aftermath of the report which DevDosh Ltd found, one of the most disconcerting stats the does warrant attention is the fact that active funds in the UK on average exceeded expectations before fees were subtracted, but did not meet targets after the fee by almost 60 basis points.
In short companies are charging astronomical fees generating huge profits (average is 35%) without providing adequate returns for their clients, I am sure you will all agree that this cannot be allowed to continue.
Some of the ways the FCA plan to tackle the problem are”
- An all-in-fee for retail investors including an estimate of trading costs.
- More stringent regulation of investment consultants.
- A ban on risk-free profits or income made when the investors buy and sell out of a fund.
- A separate regulatory investigation is to be launched into investment platforms.
The report has given the industry something to think about and outlined ways in which they can improve, the FCA are hoping this will come as a wakeup call to many of the asset management firms out there.
Andrew Bailey, FCA chief executive, said the remedies will boost competitiveness and make UK funds more attractive to retail and institutional investors.
The FCA’s recommendations would furthermore see the UK become one of the most vigorously regulatory environments for asset managers
This approach is nothing new to Financial Conduct Authority who introduced the “Senior Mangers Regime” that the banks and insurers must adhere too. The intention was to repair London’s tarnished image in the wake of numerous scandals, this means the people at the top must answer for any failings that take place under their supervision, which could leave them facing a ban or a fine.
It beggars belief but the FCA included in the report that it is debating on the idea of bringing in a regulation that obligate executives to act in the best interest of the client and consider whether or not the client is getting what they actual paid.
Why any company would need prompting to but the best interest of the clients first is totally beyond me.
“For the first time, the FCA has begun to define value and how they intend to measure and enforce it through the Senior Managers Regime,” said Andrew Glessing, Head of Regulation at Alpha FMC, a consultancy for asset managers.
Since the financial crisis back in 08 the regulatory bodies governing the financial services industry have largely for the most part concentrated on the banks.
Now the banks seem to have their house in order they are switching tack and going through the asset management industry with a fine tooth comb.
The FCA predicts its reforms to come to fruition in the next 12 months after new rules have been finalized.
The industry has until the end of September to make submissions.
If you are interesting to find out more, please visit DevDosh Ltd today.