There’s a lot to like in today’s FCA report. The report gives the UK investment profession a great opportunity to improve the way it works with customers and to move the debate on from costs and charges to focus on the vital role that the sector plays in the economy. This is a sensible and positive outcome to an important exercise.
CFA UK’s purpose is to make sure that the investment profession puts clients’ interests first. We welcome the final report as it will help to protect consumers’ interests, drive competition and addresses some of the issues that the sector faces at their root.
On the fee front, it makes sense to work with the disclosure requirements in MiFID II and PRIIPs. These will give investors clearer sight of the likely total costs they will incur and clearer information about the total costs that have been incurred. And they will do so in ways that are easy to understand and where the real financial cost is more evident.
It’s a shame that the focus is on the all-in fee. Governance is the real story and here the FCA has got it absolutely right. There’s been too little independent oversight of the way in which investment vehicles are managed. Strengthening the governance requirements – dealing with the root cause rather than with the symptoms – will improve client outcomes. We welcome the proposals for greater independence and for the extension of the SMCR to fund Boards, though we’re still unclear about how the strengthened duty to act in the best interests of investors will actually work. We like this idea in principle, but aren’t sure how it will sit alongside the existing duties to which investment managers are subject through the FCA handbook.
The moves to improve standardised disclosures, remove barriers to pension scheme consolidation, make it easier to switch investors into cheaper share classes and to look harder at benchmark operation and performance reporting will all also help us to build a foundation for an investment profession that better serves society. We look forward to supporting the FCA in this important work.
Even before its publication, the report had achieved a lot simply by focussing attention on cost and competition. It’s hard to argue with the need for that given the margins in the sector. We think that the FCA has done the right thing by tackling issues at their root and by putting the onus on firms to address these issues through improved governance and disclosures. The profession needs to rise to that challenge and to change clients’ experience of working with us.
Read the full report findings of the asset management market study.
About CFA UK
Part of the worldwide network of member societies of CFA Institute, CFA UK represents the interests of 11,600 investment professionals in the United Kingdom.
