The Financial Conduct Authority (FCA) of the UK has announced plans to change the way the country’s asset management industry is operated. After studying the industry for a year, the regulatory board said investors are not getting value for money from the £7 trillion market, which is the second largest in the world. The regulators stressed a lack of competition and a lack of transparency in the fees structure as the major reasons for the poor returns. The Financial Conduct Authority wants the industry to have a standard fee, but is hesitant to place a cap on the amount. The body is also considering turning the industry over to Britain’s Competition and Markets Authority for an investigation into anti-trust concerns. Despite a large number of companies in the industry, only three of them account for over 60 percent of the market.
“There is a strong culture of gifts and hospitality in the investment consultancy sector which could influence the ratings given to managers,” the FCA said. The single fee will better assist investors in choosing the right consultancy firm, as clients don’t know how much they pay for trading costs. The Chief Executive of the FCA, Andrew Bailey, said their primary objective was to determine if asset managers were prioritising the customers’ needs over their own. “We want to see greater transparency so that investors can be clear about what they are paying and the impact charges have on their returns,” Bailey said. Amanda Rowland, a regulation partner at PwC, said she believes the change would give investors more control and more rights protected by law. “The industry will need to work hard to demonstrate how it already best serves investors and how they intend to meet the concerns expressed,” she said. Bailey is hoping their measures would foster better market conditions, without an adverse effect on the asset managers. “A price cap is a competition measure that is a last resort. That is not a good response from the point of view of encouraging competition,” Bailey said while speaking to press.